Tax Credit help please?

SusanMum

Hi

I am a single mum. I work part time (18.5hpw) and earn £12,500pa. Due to another staff member being off sick, possibly long term, I have been asked to work additional paid hours (probably 8hrs per week) which will top up my income by around £70 pwk after tax etc.

Last year I just earned £4000 for the whole year so my tax credits are based on that. (I only started work in Feb 2011). I know my working tax credit will go down next year because of my 2011-2012 income, but when do I need to inform tax credits about this extra work? I informed them that I'm working 18.5 hours and was earning £12,500 when I started work.... but these extra hours are temporary and I don't know how long they will continue..... making it impossible to give a guess on how much I will earn in this tax year.

Sorry if this makes little sense! I am just wondering when I am meant to tell the tax credits people..... I don't think I'll earn much from working these extra hours because it will be deducted from my wtc, but I also don't want to end up with a huge bill if they have overpaid me!

Thanks for any help offered!

xylophone

If you look up tax credits on the Directgov website you will read as follows:
Why it's so important to report a change straight away
Not telling the Tax Credit Office about a change in circumstances straight away is one of the main reasons that overpayments happen.
If you don't tell the Tax Credit Office straight away about a change they won't know about it until they ask you to confirm your actual circumstances. This could be for example when they send you a renewal pack between April and July of the following year. This means:
you could have been overpaid from the date of the change - which you may have to pay back
you could have to pay a penalty of up to £300 if you’ve been overpaid
you could lose out if the change meant you were entitled to more money - increases can usually only be backdated by up to three months from the time you report the change
Looks as though you should be getting in touch with them now.

zagfles

You should be OK for this year unless the OT goes on for a while...work out the likely annual income over this tax year and if it's below £16420 then your tax credits this year won't be affected.

But your tax credits next year will be reduced due to the OT, even if doesn't continue into next tax year, since there will be a disregard for income drops.

SusanMum

Thanks.

The problem is that I don't know how long this will continue. The lady off sick may not even return. If that's the case, I may be asked to increase my hours on a permanant basis.

I wish there was a way to check how much your next year's tax credits would be affected by increasing your hours. I would like to work longer hours but I can't afford to do it for nothing and I'll end up losing money with childcare in the school holidays.

I'll give tax credits a call and see what they say.

Thanks again!

Mammato1

You need to tell them! As for hours and income I know it is difficult to work it out but:
1. The increase in hours may be a good thing provided the income doesn't go over the threshold
2. The way you work out your annual income is fairly easy provided you have a slip or a contract which states your annual salary and pro rata. It looks to me that you have worked on 12,500 salary for 7 months so divide it by 12 to get monthly income (will be under £1200) then multiply by 7 months and you get the total income for 7 months. Now if your payslip or contract says that now you're on let's say £20.000 (for the sake of argument) do the same thing: 20K divided by 12 (uner £2K) but you'd be on this salary for the remaining 5 months so multiply by 5 and you get around 10K. Than add the two. In this example it's be over £18K so would take you over the threshold and would affect tax credits.

Personally if you don't know for how long it'd continue I would assume it'd continue for the remaining months of the tax year and would base my calculations on that. I personally feel it's better to be underpaid than overpaid. If your hours decreace again you tell them again and you give them a new estimated income. If you end up being underpaid they should pay you a lump sum at the begining of the next year.

Also talk to your employer if you can, tell them you are willing to help but it may be that if you're going to go over the threshold it'd be counterproductive. Ask whether the hours could be negotiated or shared with someone else, etc.

There is a solution to every problem :-)

Good luck