WTC disregard question

jp83_2

Hi,

I am a bit confused with how the 10k disregard for tax credits works. I am in receipt of working tax credits, claiming as a couple, no children. I understand that this years payments are based on last tax years income. Get approx £140 a month WTC at the moment based on last years income and won't be getting it next year as income will be too high (18k joint income).

Due to me working again, our income will go up around £9000 for the year which is very close to the £10k disregard. With consideration to taking on extra hours at work, what would happen if we went over this 10k figure? Do we lose all our tax credits and have to pay them back (because income will be too high) if we go over or does it depend how much we go over?

I am asking because between us overtime won't add up to much (both on low wages) but could potentially push us just over the 10k disregard (by a few hundred £ not thousands) so effectively we would be doing overtime for free AND still be out of pocket. What a bizarre situation to be in eh?

However, if work ask me to do extra hours due to being short of staff I don't really know how to explain to them the situation and that although they are paying me more I will lose out overall for the year

Any advice would be appreciated thanks

Icequeen99

No, you won't lose them altogether.

As you said, if your income rise between current and previous year is £10,000 or less, the claim remains on previous year basis.

If your current year increases by more than £10,000, you switch to current year income minus £10,000.

Basically you still get the benefit of the £10,000 disregard but anything over that affects your current year claim immediately.

IQ

bestpud

I agree.

Make sure you keep a close eye on your income and inform them immediately if it goes over the £10k, as you will fall straight into an overpayment, as said.

If they take a while to stop paying you, put the money aside, as they will want it back.

jp83_2

Hi, thank you for your replies

Just to clarify I thought I give you the actual figures to check my understanding is right.

Last years income (2010-2011) was £13,500 for both of us and this is what this years payments are based on.

This year income will increase by around £9500 (my wages) which wouldn't affect this years payments, but if it went over £10,000 they would recalulate this years payments based on this years actual income?

But if I understand this correctly the 10k disregard would still apply meaning if income went up by say £10,500, 10k would still be disregarded, so would be calculated as a £500 increase in income? Meaning it would be recalculated based on £14,000 income so shouldn't effect the payments greatly as only a £500 increase?

In which case working small amounts of overtime shouldn't make us worse off if I am understanding correctly as tax credits lost will be replaced by increased earnings? What I was concerned with was if they based it on this years income without the 10k disregard we would get nothing (and have to pay back all tax credits for this year) so would be effectively doing overtime for free and still be out of pocket.

If I've still got this wrong I'd appreciate your further help and comments!!

Thanks

zagfles

Your understanding and IQ's post are correct so don't worry. If you go slightly over £10k your tax credits will only be slightly reduced.

But next year's tax credits will be based on your higher income so don't get used to the extra money!

jp83_2

Thanks for your replies everyone, much appreciated.

lilibet1

could someone please explain this 10,000 disregard figure? Im confused. Many thanks inadvance

Lilibet x

zagfles

lilibet1 wrote: »

could someone please explain this 10,000 disregard figure? Im confused. Many thanks inadvance

Lilibet x

Err...it's explained pretty much perfectly in this thread. What don't you understand?

lilibet1

am i right in saying that if you tell ctc/wtc that your income for 2011/12 is going to be approx 15,000 am i right in thinking it can go up by 10,000 to 25,000 and not make a difference to my payments?

Matthew300

lilibet1 wrote: »

am i right in saying that if you tell ctc/wtc that your income for 2011/12 is going to be approx 15,000 am i right in thinking it can go up by 10,000 to 25,000 and not make a difference to my payments?

Yes you are correct. 2009-2010 salary was £7000 lower than 2010-2011 salary, but because we didn't estimate a salary and it was based on the previos year we didnt have to pay a penny back even though we had earnt more money. This years claim reduced though from April.

lilibet1

thanks matthew, i have told ctc/wtc that income will be 15,000 and i thought that i had to let them know immediately if it was going to be higher. Not that there is a lot of chance that i will earn upto 25,000. Thanks for your help.