tax credits

georgina32

Hi everyone,

I'm new here! I wonder if anyone can help, i have a question about tax credits. I'm on disability tax credits at present, I setup my own business on the 2nd Jan this year.

They awarded me the full amount as i've not worked for a number of years due to severe mobility problems caused by MS, so i've no history of earnings.

I understand I'll have to renew the tax credits in April. I'm a bit confused how they'll work out my entitlement for the next tax year and if I will need to pay anything back.

Im currently earning about £200 per week, every week, that would be less my personal allowance for this year. I know if i earn this much my tax credits will be reduced at some point. If I earn £200 per week till april, will I need to pay some back in april? or will it just be reduced to the lower amount in april?

Basically, I need at what point my tax credits will be reduced and when or if I would be required to pay back any surplus, so I can be prepared.

I'd very much appreciate if anyone could explain it to me as I find it a bit confusing.

Thank you so much!
Georgie

zagfles

1) your tax credits are initially based on last year's income
2) as long as your income doesn't rise by more than the disregard (25k this year, 10k next year), you won't have an overpayment
3) if your income goes down this year you can claim more
4) you might have an overpayment in your "run-on" payments - ie payments between the start of the tax year and when they process your renewal - because these are initially based on income for 2 tax years ago. They'll take these out of your payments for the rest of the year.

They are going to introduce a disregard for income falls in 2012 or 2013 I think (but only about 2500 or so).

georgina32

i didnt know about the disregard, just been reading about it, thanks!
so am i right in thinking that if I earn less than £25k (which i will!!) between between Jan 2nd (start of my business) and the end of this tax year, none of my income will count towards the tax credits award, so i'd just get the full award for next year? or did i miss something

zagfles

georgina32 wrote: »

i didnt know about the disregard, just been reading about it, thanks!
so am i right in thinking that if I earn less than £25k (which i will!!) between between Jan 2nd (start of my business) and the end of this tax year, none of my income will count towards the tax credits award, so i'd just get the full award for next year? or did i miss something

No. If you earned nothing last year and earn less than 25k this year, then you'll get full tax credits this year.

Next year your tax credits will be initially based on THIS year's income (ie the previous year).

So if you earn 10k between now and April this will be the income they use for next year's claim. Provided your income doesn't exceed 20k next year there won't be an overpayment.

georgina32

Ah cool, i get it now. Thanks for taking the time to explain it zagfles!

Georgie