Will buying a property affect my working tax credit?

[Deleted User]

At the moment I'm getting working tax credit and am a tenant in rented property as I've recently got divorced (am self emplyed).My younger brother passed away just before Xmas and my mother has accepted an offer of 71k for his flat.She is going to give me 50k for me to buy a flat in order that I can stay close to my 11 yr old son (lives with his mum) and not have to keep paying £500 a month on rent where I am now...which is good for both my son and myself ! I was wondering whether my tax credits would stop altogether and also what bearing my claiming tax benefits would have in applying for a small (40,000) mortgage.

[Deleted User]

tax credits arent interested in your outgoings ONLY your income

karenx

You must be earning less than 13k if getting working tax credits, will you be accepted for a mortgage?

BigAunty

Owner occupiers do not have their benefits impacted by equity in their property. It's generally only an issue for those who own a second property, the capital in it, or have one they don't live in and receive rental income.

[Deleted User]

My brother passed away before Xmas and my mother is selling his flat and giving me 50k to buy.I only started claiming working tax credit after my divorce and had to rent a flat at an astronomical £525 a month,so being self employed profits have been slashed considerably.I'm looking at getting a flat around £80k...but I was just wondering if I do get a small mortgage would I still be entitled to working tax credit? If I did get a small mortgage and bought I hopefully wouldn't need to claim any more working tax anyway as my monthly payments would halve !

[Deleted User]

Thanks for the replies by the way..

BigAunty

Working tax credits are based on income, not expenses. Even if your personal expenses, like rent or mortgage change, this plays no factor in entitlement. So you don't have to sign off from claiming WTC just because your outgoings reduce - benefits and allowances are rarely calculated on living costs and usually are derived purely from income.

It is a change in circumstance if your income increases or decreases which you should report for tax credits as your entitlement would be affected but the HMRC won't care about your change in tenure from tenant to home owner and any changes in expenditure this causes you.

Working tax credits do not take into account capital, such as any equity that has built up in a personal property (the difference between market value and mortgage owed).

AFAIK, for tax credits, a claimant only has to declare interest received from savings over £300 as this is classed as income - capital in the form of the equity in your property or value of it is irrelevant.

Your business self employment profit did not go down just because your rent took up so much of it - your personal expenses increased!

BTW, does your mother claim any means tested/income based benefits like council tax discount, housing benefit or pension credit, for example?

[Deleted User]

Big Aunty....I don't think my ma claims any of those...she's on a basic £200 odd pension a month as far as I know..

BigAunty

Deleted_User wrote: »

Big Aunty....I don't think my ma claims any of those...she's on a basic £200 odd pension a month as far as I know..

The reason I ask is because the benefit authorities can take a dim view of a benefit claimant (means tested/income related ones like council tax benefit, housing benefit, pension credit) who come into capital and then give it away as they expect the claimant to sign off and spend their own money instead of the taxpayers on their basic living costs. This is known as deprivation of capital.

Also, if your mother needs a care home in the future, the local council may check what's happened with her capital, again expecting a care recipient to pay for their care with their own money rather than than finding that they've gifted away their capital to others.

[Deleted User]

BigAunty wrote: »

The reason I ask is because the benefit authorities can take a dim view of a benefit claimant (means tested/income related ones like council tax benefit, housing benefit, pension credit) who come into capital and then give it away as they expect the claimant to sign off and spend their own money instead of the taxpayers on their basic living costs. This is known as deprivation of capital.

Also, if your mother needs a care home in the future, the local council may check what's happened with her capital, again expecting a care recipient to pay for their care with their own money rather than than finding that they've gifted away their capital to others.

So when the sale goes ahead...is it better for the money to go straight to me and then I give her what she was going to keep ie.15k-20k. ? Both my ma and pa were self emplyed until recently when my ma has been working PAYE part time in market research.My pa gets £400 a month pension.The only savings they have are from the DWP around 12k from my late brothers steelworks pension.

shedboy94

Deleted_User wrote: »

At the moment I'm getting working tax credit and am a tenant in rented property as I've recently got divorced (am self emplyed).My younger brother passed away just before Xmas and my mother has accepted an offer of 71k for his flat.She is going to give me 50k for me to buy a flat in order that I can stay close to my 11 yr old son (lives with his mum) and not have to keep paying £500 a month on rent where I am now...which is good for both my son and myself ! I was wondering whether my tax credits would stop altogether and also what bearing my claiming tax benefits would have in applying for a small (40,000) mortgage.

How much are you earning to enable you to get a £40000 mortgage?