Will a lump sum cause a tax credit overpayment?

slightlyconfused1

Hi

Sorry if this is a stupid question

My sister has been medically retired. When she gets her final salary payment she will also get a payment for accrued annual leave. I know when she informs wtc she will have her award adjusted for the rest of the year but will this cause an overpayment for this year too?

This lump sum will be paid in March and she honestly has no idea how much it will be. However as she will have no further income she will need that money to help her get by. The last thing she needs is wftc to say that she has received too much throughout the year because of this final payment. She will tell them as soon as she is paid this money, she really doesn't want an overpayment.

slightlyconfused1

anyone got any advice?

zagfles

She'll probably be OK as there's a 25k disregard for income increases over last year. So as long as she's being paid based on last year's income and this year's is not more than 25k higher she'll won't have an overpayment, as long as she tells them immediatly she stops work as she'll stop being entitled to WTC from when she stops work.

slightlyconfused1

Thanks Zagfles

I would imagine it will be a lot less than £25,000 difference (I don't know if she even earns £25,000). Her income dropped during the year and she informed them so she is being paid based on her estimate of this years wages. Does this make a difference? She always tells them as soon as her circumstances change as she dreads being presented with a bill she can't pay.

Is there a £25,000 disregard every year or is it just this year?

Sorry to ask so many questions but I am trying to reduce her stress as much as possible but obviously can't deal with it for her.

zagfles

slightlyconfused1 wrote: »

Thanks Zagfles

I would imagine it will be a lot less than £25,000 difference (I don't know if she even earns £25,000). Her income dropped during the year and she informed them so she is being paid based on her estimate of this years wages. Does this make a difference? She always tells them as soon as her circumstances change as she dreads being presented with a bill she can't pay.

Is there a £25,000 disregard every year or is it just this year?

Sorry to ask so many questions but I am trying to reduce her stress as much as possible but obviously can't deal with it for her.

Yes it will make a difference if she's being paid on a lower estimate. As it happens I've just explained it in another 2 threads in the last hour! - see the "25k disregard" and "disregard help" threads from today.

25k is this year - it's dropping to 10k next year and I think further the year after.