Disregarded Disregard Rule

50Twuncle

I have a problem with HMRC and their "disregarded income" rules with WTC.

My issue is that they claim to have overpaid me by almost £1800 last TY - Due to my income increasing during the year - by £700 per month (ill health pension) - I informed them (registered post) straight away and my subsequent payments actually increased....

What I am unsure of is whether to use the disregarded income rule or the utter incompetence of HMRC rule to fight back ?

For those who don't know - the DISREGARDED INCOME rule allows for "minor" increases in income during the TY of up to £25k without any effect on WTC payment - they work on long term average income - but in my case, I was only claiming WTC for 6 months......

zagfles

21Twinkle wrote: »

I have a problem with HMRC and their "disregarded income" rules with WTC.

My issue is that they claim to have overpaid me by almost £1800 last TY - Due to my income increasing during the year - by £700 per month (ill health pension) - I informed them (registered post) straight away and my subsequent payments actually increased....

What I am unsure of is whether to use the disregarded income rule or the utter incompetence of HMRC rule to fight back ?

For those who don't know - the DISREGARDED INCOME rule allows for "minor" increases in income during the TY of up to £25k without any effect on WTC payment - they work on long term average income - but in my case, I was only claiming WTC for 6 months......

They are unlikely to have got the disregard rules wrong. The disregard applies to increases from one tax year to the next - what was your income last tax year, and what was it the year before?

50Twuncle

Combined (self and wife) income last TY - Approx £20k
Combined income previous TY - Considerably more (redundancy)
I was entitled to the Disability Premium
Total elements - £3570 - which we received
Reduction (due to income) £1200
They are now trying to claw back an extra £1800 (which I believe was their mistake)
Incidentally - I was only in paid employment for 7 months last year - I was on a fixed non renewed contract which ended at the end of the TY....

cfnc

I think because you informed of change the disregard rule may no longer apply.

zagfles

21Twinkle wrote: »

Combined (self and wife) income last TY - Approx £20k
Combined income previous TY - Considerably more (redundancy)

That explains it then. The disregard applies to increases from one tax year to the next. There was no increase last tax year from the one before, so there is no disregard.

It doesn't apply to increases within a tax year.

zagfles

cfnc wrote: »

I think because you informed of change the disregard rule may no longer apply.

Makes no difference. Telling them only affect when you get paid, never how much.

Icequeen99

21Twinkle wrote: »

Combined (self and wife) income last TY - Approx £20k
Combined income previous TY - Considerably more (redundancy)
I was entitled to the Disability Premium
Total elements - £3570 - which we received
Reduction (due to income) £1200
They are now trying to claw back an extra £1800 (which I believe was their mistake)
Incidentally - I was only in paid employment for 7 months last year - I was on a fixed non renewed contract which ended at the end of the TY....

The only way to give you accurate advice is if you can tell us the tax year each of those income figures relate to and the year that your overpayment relates to.

Also, did you report any other (lower) incomes during the year at any point before giving your final income?

IQ

50Twuncle

Icequeen99 wrote: »

The only way to give you accurate advice is if you can tell us the tax year each of those income figures relate to and the year that your overpayment relates to.

Also, did you report any other (lower) incomes during the year at any point before giving your final income?

IQ

tax years were last year (10/11) and previous year (09/10)
and no reports of lower income during the year were sent.....

zagfles

If you were entitled to the Disabled worker element you only get that while you're working, so would only have been entitled to it for part of the tax year. Could be that's the problem, rather than the increase in income?

50Twuncle

zagfles wrote: »

If you were entitled to the Disabled worker element you only get that while you're working, so would only have been entitled to it for part of the tax year. Could be that's the problem, rather than the increase in income?

No - I was receiving WTC on a monthly rate of around £140 per week based on a six month period (leading up to the end of the TY) - Had I continued to work, I assume that this rate would have continued ad infinitum ?
I have written to HMRC (giving them, as they give others - 30 days to reply) to ask for an explanation - the problem being that they don't ever respond personally, only by sending computer generated letters......

Icequeen99

21Twinkle wrote: »

tax years were last year (10/11) and previous year (09/10)
and no reports of lower income during the year were sent.....

In that case I agree with the Zagfles, the disregard cannot have caused this because you had a fall in income from 09/10 to 10/11 rather than a rise.

There are many reasons why you could have been overpaid, so you have done the right thing in querying it.

IQ