Child Tax Credit query

Davidp77

Hi

Was hoping someone could help, I'm having a nightmare even getting through to speak to someone on the phone about our childt tax claim so thought I would try on here.

We have just had our first baby and sent off the forms, it appeared to me that all the information they requested was based on the tax year 2010-2011. However we have now received our first payment which is about £10 per week and a letter from them but it states that me and my partner are both working 40 hours per week and we should contact them if anything changes?

However, i made a seperate note on the form that my partner is now on maternity leave and is on her basic maternity pay. Is this standard for this to stay on the letter that we are both working and will they recalculate our tax credit again in april, and see that for most of the tax year my partner has been on maternity pay therefore we should expect a higher payment of tax credit from April 2012 onwards?

Or should I contact them now to say she is not working and just on basic maternity pay?

Any help would be appreciated.

Icequeen99

Tax credits are always initially based on previous year income (which is why the claim form asked for 10/11 income).

You have two choices open to you now. You can ring HMRC and give them an estimate of your lower current year income. Don't forget you can deduct £100 for each week your partner gets Statutory Maternity Pay from her total income.

The advantage of this is that you will see your tax credits increase immediately. The problem is that if your estimate turns out to be too low (for example if she went back earlier than expected) you will have an overpayment to pay back.

The other option if you can manage on the tax credits you currently get is to leave them as they are, when HMRC ask for your actual 2011/12 income next year you will give them the lower amount and they will give you a lump sum for any underpayment.

There can be other advantages/disadvantages depending on whether you claim other benefits like housing benefit and council tax benefit.

IQ

Davidp77

Thanks for the info.

I also eventually got through to someone on the phone today. However, now I am a bit confused again. He advised that we should tell them of our current situation i.e partner on maternity pay as our payments will go up a little. I said I didn't want to do it on estimated income for the rest of the year and would rather give actual earnings next april and receive a new amount from then which I know will be right.

But that now makes me think, if we are entitled to get a few pounds more now for the rest of the year based on our current income, will we get this extra as a lump sum at the start of the new tax year for the extra they should be paying us now?

I thought that if we only get the new amount from april, we have lost out on 5-6 months of extra benefit?

Have I got this right?

Any help would be appreciated

Dave

zagfles

Davidp77 wrote: »

Thanks for the info.

I also eventually got through to someone on the phone today. However, now I am a bit confused again. He advised that we should tell them of our current situation i.e partner on maternity pay as our payments will go up a little. I said I didn't want to do it on estimated income for the rest of the year and would rather give actual earnings next april and receive a new amount from then which I know will be right.

But that now makes me think, if we are entitled to get a few pounds more now for the rest of the year based on our current income, will we get this extra as a lump sum at the start of the new tax year for the extra they should be paying us now?

I thought that if we only get the new amount from april, we have lost out on 5-6 months of extra benefit?

Have I got this right?

Any help would be appreciated

Dave

Telling them or not telling them makes no difference to the amount you'll get in total, it only makes a difference to when you'll get it.

Yes if you don't tell them your income is dropped you'll get a lump sum on renewal. If you do tell them, you'll get increased payments from now till April and a correspondingly smaller lump sum to make up for what they should have been paying you from April this year till now. The total will be the same.

As said if your estimate is too low there might be an overpayment, but unless it's massively too low it's unlikely, since they no longer backdate underpayments to the start of the tax year.

You could always put any extra you get aside if you're really worried...

AimeesMum_2

Just to add that you don't always get a lump sum on renewal. I was owed £1100 and I only recieved £400 as a lump sum and the rest was split over the rest of the tax year. x

Icequeen99

AimeesMum wrote: »

Just to add that you don't always get a lump sum on renewal. I was owed £1100 and I only recieved £400 as a lump sum and the rest was split over the rest of the tax year. x

Zagfles is absolutely correct for the situation of the OP. You will still end up with the same entitlement over the year you are just choosing when to receive it.

As I said previously, you can tell them your circumstances and lower income now and get increased payments for the rest of the year OR you can stay as you are and tell them the lower income figure after the end of the year and get a lump sum.

With regards to the lump sum point by AimeesMum, that isn't correct and there is likely another reason why she didn't get the full amount. We are talking about lump sums from a tax year that has ended, the tax credit legislation is very clear that HMRC have to give a lump sum for any underpayment.

If a lump sum is due in the current year, for example they take a while processing a change of circumstances that gives you more money, you won't get the full lump sum and they will spread it over the year. But they can't take a lump sum owed from one year and pay it to you over the next. AimeesMum I would get that checked out if that is what you think happened.

IQ

zagfles

Icequeen99 wrote: »

With regards to the lump sum point by AimeesMum, that isn't correct and there is likely another reason why she didn't get the full amount. We are talking about lump sums from a tax year that has ended, the tax credit legislation is very clear that HMRC have to give a lump sum for any underpayment.

If a lump sum is due in the current year, for example they take a while processing a change of circumstances that gives you more money, you won't get the full lump sum and they will spread it over the year. But they can't take a lump sum owed from one year and pay it to you over the next. AimeesMum I would get that checked out if that is what you think happened.

IQ

But it seems they can offset a current year overpayment against a previous year underpayment - so this can have the same effect as spreading some of the PY underpayment over the CY:

www.hmrc.gov.uk/manuals/tcmanual/TCM0232200.htm

From June 2005, set off can also occur when there is an underpayment in an earlier award period and a notional overpayment for the same household in the current award period. The notional overpayment is reduced or cleared before issuing any arrears to the customer. The net effect of this is to cancel any in-year adjustment, thus increasing the regular payments made to the customer. This can be incorrectly perceived to be spreading the underpayment over the remainder of the award period.

I think this can be down to a simple timing problem - if at the time they process the renewal there is a CY overpayment simply because they've just had a 4-weekly payment (say first payment was on 6 April and second was on 4 May and that's when the process the renewal - 2 payments have been made over 29 days hence almost certainly an overpayment).