Working Tax Credit - Is there an earning cap?

dvs

My friend has just been awarded WTC (standard and disability elements). My understanding is that it is based on your earnings in the previous tax year but in their notification letter it mentions 'After the end of the tax year, when all the information is known, we make a final decision about how much you are entitled to receive'. So is their award for this year based on last year but if their wages rise, they could have to repay some of their award? I can't seem to find out any information.

System

Yes the 2011/2012 award is based on their 2010/2011 income but at the end of the 2011/2012 your friend will have to confirm their actual income for 2011/2012 by submitting their annual declaration by 31/07/2012.

There is a cap to the amount they can receive based on their income and the type of disability benefit they receive. However as long as their income in 2011/2012 does not exceed their 2010/2011 income by more than £10K they will not have to pay back any of their award.

dvs

Thanks Pam17 for your response.

So is there a scale or online guide where you can work out what they may have to pay back? I completed the forms for my friend and at the time I'm sure we confirmed that in 10/11 they earned £1,000 and that in 11/12 we estimated their income to be around £15,000. My friend now anticipates that their pay could be above £20,000. I'm worried that applying for WTC will backfire on them now.

Kalia

If you have a change of circumstances you are supposed to call to let them know and an increase in income is a change in circumstances.

dancecrazylegs

Kalia wrote: »

If you have a change of circumstances you are supposed to call to let them know and an increase in income is a change in circumstances.

sorry i but i dont agree with your statement, yes you have to inform them of change of circumstances, but in our case as my husband is self employed it is impossible to know from one week to the next what his income will be

pipscot

dancecrazylegs wrote: »

sorry i but i dont agree with your statement, yes you have to inform them of change of circumstances, but in our case as my husband is self employed it is impossible to know from one week to the next what his income will be

You are correct - you do not have to ring Tax Credits and inform them of every change of income. As self-employed people do not usually know until well past renewal time what their actual income is (often waiting to get tax return done!!!) they can supply estimates to Tax Credits instead.

It is worth thinking about letting Tax Credits know if you have a suspicion that your income may be higher than expected because although it may not affect you during the tax year, it is possible to be overpaid during the period between April 6th and renewal of the following tax year.

dvs

So is there a guide or calculator that works out how much can earn?

pipscot

dvs wrote: »

So is there a guide or calculator that works out how much can earn?

Yes - try the calculator at https://www.entitledto.co.uk

It won't tell you "how much you can earn" but if you try putting in different estimated earnings you can see what benefits you will be entitled to at different earnings levels.

As another poster confirmed - if you already know how much you earned in 2010/2011 then you can earn up to £10K more in 2011/2012 without incurring any overpayments.