Tax credits and Inheritance

samj39_2

I have just received a payment from a relatives estate. Do I declare this as income for the current year i.e. next July or do I need to phone them? The money will pay off my motgage so I won't have capital to declare.

Thanks

MrsManda

Paying off your mortgage may count as deprivation of capital meaning that you get treated as still having the capital when your tax credit claim is assessed.
You need to inform the HMRC of your change in circumstance as soon as possible. They'll tell you what you need to do and whether it'd be classed as deprivation of capital for your TC claim - make sure you get any decision in writing and make a note on when you called.

http://www.hmrc.gov.uk/manuals/dmgmanual/html/DMG41001/09_0194_DMG45028.htm

zagfles

MrsManda wrote: »

Paying off your mortgage may count as deprivation of capital meaning that you get treated as still having the capital when your tax credit claim is assessed.
You need to inform the HMRC of your change in circumstance as soon as possible. They'll tell you what you need to do and whether it'd be classed as deprivation of capital for your TC claim - make sure you get any decision in writing and make a note on when you called.

http://www.hmrc.gov.uk/manuals/dmgmanual/html/DMG41001/09_0194_DMG45028.htm

There are no capital rules in tax credits so there are no deprivation of capital issues.

That manual page looks like it's for the old WFTC, it's not for current tax credits.

samj39_2

MrsManda wrote: »

Paying off your mortgage may count as deprivation of capital meaning that you get treated as still having the capital when your tax credit claim is assessed.
You need to inform the HMRC of your change in circumstance as soon as possible. They'll tell you what you need to do and whether it'd be classed as deprivation of capital for your TC claim - make sure you get any decision in writing and make a note on when you called.


Thanks for this. I was so pleased that I am about to be debt free I didn't think much further ahead. I am not concerned about the outcome of the assessment, without our mortgage we can get by on our salaries, but I didn't want to get into a position of owing them money for overpayments so I will take your advice and phone them in the morning.

zagfles

samj39 wrote: »

I have just received a payment from a relatives estate. Do I declare this as income for the current year i.e. next July or do I need to phone them? The money will pay off my motgage so I won't have capital to declare.

Thanks

If it's a straightforwards inhertance, ie capital, then you don't need to declare anything and your tax credits will be unaffected.

samj39_2

zagfles wrote: »

There are no capital rules in tax credits so there are no deprivation of capital issues.

That manual page looks like it's for the old WFTC, it's not for current tax credits.

Thanks for replying, but now I'm really confused! So if I pay off my mortgage I only have to inform them that I received the money but that I no longer have it?

zagfles

samj39 wrote: »

Thanks for replying, but now I'm really confused! So if I pay off my mortgage I only have to inform them that I received the money but that I no longer have it?

You don't have to inform them at all. Assuming it was a straightforwards inheritance of capital.

samj39_2

Yes it was a % share of the total estate in cash, which I assume is what you mean by straightforward.

thorsoak

samj39 wrote: »

I have just received a payment from a relatives estate. Do I declare this as income for the current year i.e. next July or do I need to phone them? The money will pay off my motgage so I won't have capital to declare.

Thanks

An inheritance is not INCOME - it is CAPITAL. If you invest the capital and receive interest therefrom then that is income.

Others who have more experience than I have will be able to advise you on whether paying off your mortgage will equate with deprivation of capital and thereby preclude you from benefits - although I would imagine that if your mortgage is paid off, then you wouldn't be claiming any mortgage relief payments - so what would be the difference??

Congratulations on the inheritance BTW!

samj39_2

I don't claim any benefits other than tax credits so the mortgage relief is not an issue. Thanks to all for your replies, I can look forward to being debt-free with a clear conscience!:j

McKneff

Congratulations on the inheritance BTW!

:eek: But somebody had to die for him to get it.