How much income increase reduces tax credits ?

gilbutre

Hi everyone,

I saw on HM Customs & Revenus website that the amount of my tax credits won't decrease unless my income increases by £10,000 a year.

I find it strange that tax credits don't decrease more easily according to the income. Can anyone confirm this information ?

partysis81

I thought there was a £2500 threshold? but i also think it depends on whether you estimated the amount or not? I'm sure someone in the know will be along shortly with more info xx

gilbutre

Yes, there's a £2,500 threshold for increasing tax credits when income goes down. But in the other way around the threshold is £10,000 according to the hmrc.gov.uk website. Sorry I can't paste the URL as the forum doesn't allow me to.

So their website clearly says that, but because I find it stange I would like to have somebody confirming this just in case !

zagfles

gilbutre wrote: »

Yes, there's a £2,500 threshold for increasing tax credits when income goes down. But in the other way around the threshold is £10,000 according to the hmrc.gov.uk website. Sorry I can't paste the URL as the forum doesn't allow me to.

So their website clearly says that, but because I find it stange I would like to have somebody confirming this just in case !

Yes it is the case.

Reason for it is that a few years ago there were all sorts of overpayment problems that were causing the govt extreme embarrasment, and rather than fixing the underlying cause (ie using an annual assessment method) they introduced a massive disregard for increases, of £25,000. This has now been reduced to £10,000.

gilbutre

@zagfles : ok, so the 10,000 threshold is a remnant of the 25,000 one : both are excessive, but the new 10,000 one is less excessive. Am I correct ? If so, does that mean that they may further reduce the threshold now that annual assessments are implemented ?

nonnatus

I've read this thread three times and I STILL don't get it!

My income for last year was estimated to be £23,000 because I changed jobs and working hours a couple of times. Adding it all up, using P60 etc, it actually came to £25, 051. I've been DREADING sending the form back because I believe they will want their £2,000 back. Am I right to be scared or not???

(Sorry to hi-jack your thread OP with my own question, but it may shed light on your problem too?? )

Horseunderwater

nonnatus wrote: »

I've read this thread three times and I STILL don't get it!

My income for last year was estimated to be £23,000 because I changed jobs and working hours a couple of times. Adding it all up, using P60 etc, it actually came to £25, 051. I've been DREADING sending the form back because I believe they will want their £2,000 back. Am I right to be scared or not???

(Sorry to hi-jack your thread OP with my own question, but it may shed light on your problem too?? )

As you actual income is less than £2.5k over, it should be ignored and hopefully nothing due to be repaid!

Horseunderwater

To OP:
Did you do an estimated earnings prediction for this year with them? If yes, is it above or below what you said? If higher, but not £2.5k more than estimate, they should ignore that amount, but if it is over £2.5k but under £10k, they will taper award down by 41% - so they take off (add £2.5k to your earnings and then the difference between that amount and the £10k is worked at 41%). If well over £10k they will still do that but if that total takes you over the £15k? WTC/CTC threshold, then you would not get anything. Hope that makes some sort of sense. That is how the basics works, but there are other factors involved like how many children you have, if single parent or a couple, pension payments and other related income to take into account or not. Only the OP will know their exact details and circustances.

zagfles

nonnatus wrote: »

I've read this thread three times and I STILL don't get it!

My income for last year was estimated to be £23,000 because I changed jobs and working hours a couple of times. Adding it all up, using P60 etc, it actually came to £25, 051. I've been DREADING sending the form back because I believe they will want their £2,000 back. Am I right to be scared or not???

(Sorry to hi-jack your thread OP with my own question, but it may shed light on your problem too?? )

The disregard doesn't apply to estimates, it applies to increases in actual income from one tax year to the next.

So whether you have an overpayment or not depends on what your income was in the previous tax year. If it was anything between £15051 and £23000 you're OK as you're covered by the disregard. If not, you will have an overpayment of about £800.

zagfles

Horseunderwater wrote: »

To OP:
Did you do an estimated earnings prediction for this year with them? If yes, is it above or below what you said? If higher, but not £2.5k more than estimate, they should ignore that amount,

This is rubbish, as I've said before the disregard DOES NOT apply to estimates.

gilbutre

But if it's all about the difference between one tax year to the next, then you can increase your income by, say, £8,000 each tax year, while receiving exactly the same amount of tax credits forever ? o_O