Tax Credits help

tinkerbellkirst

Hi, i hope someone can shed some light on this. I think i have it worked out but may be overthinking it and am now loosing sight of whats correct!

We claim tax credits, we get no WTC but get some CTC to help with childcare.

Last year we earnt a certain ammount between us, this year we will earn slightly more as my partner has had a payrise, its not massive and he may earn 2000 more maximum. We are getting payments that were calculated at the end of April which have dropped substantially from last years payments when they brought the changes in.

If i do not inform tax credits that we will have a rise in income (as we dont really know how much as my partner works shifts etc) will we get an overpayment? Is this where the disregard comes in? as this years payments are based on last years income? So when they calculate in April they will use this years actual income minus any disregard? And our next years payments will just be less?

I hope this makes sense and it would be helpful if someone could clarify this.

Thanks

Horseunderwater

Depends on how many Children you claim CTC for.
If one income limit is £26k if 2 or more limit is £32k. So if your income will be above either of those then you might not get any at all now. If you want some further help, more details needed.

HappyMJ

If you get CTC to help with childcare then it is the Childcare Element of Working Tax Credits that you get of up to 70% of £300 per week. You will also get Working Tax Credits and Child Tax Credits. The amount you get will be reduced by any income you get so it might only feel you get help with childcare but you get all the elements added together and then reduced.

You might be better off on childcare vouchers so you might want to look into them.

Icequeen99

Horseunderwater wrote: »

Depends on how many Children you claim CTC for.
If one income limit is £26k if 2 or more limit is £32k. So if your income will be above either of those then you might not get any at all now. If you want some further help, more details needed.

But that is CTC only, if the OP is claiming childcare costs then their cut-off limits will be higher than those quoted.

IQ

Icequeen99

HappyMJ wrote: »

If you get CTC to help with childcare then it is the Childcare Element of Working Tax Credits that you get of up to 70% of £300 per week. You will also get Working Tax Credits and Child Tax Credits. The amount you get will be reduced by any income you get so it might only feel you get help with childcare but you get all the elements added together and then reduced.

You might be better off on childcare vouchers so you might want to look into them.

The OP might be getting no childcare element of WTC, but more CTC because the childcare element was included in the calculation. That is often what confuses people.

IQ

tinkerbellkirst

I have looked into Childcare vouchers but are not better off claiming them than Tax Credits.

As stated above as we are claiming for childcare costs the cut off limits are different but there is no clear limits on this.

My income is around £10900 part time.

My partners income will be around £21000 for full time (i think)

Our previous years income was £9600 ish for me and £18900ish for my partner.

Our income hasnt increased past the £10000 or £5000 disregard whatever it is this year. Does this mean our current award wont be affected? just next years? Our Childcare costs remain the same, we get very little CTC anyway its mostly the childcare element we recieve.

Thanks x

HappyMJ

If you claim vouchers instead you would pay for them using before tax income. So getting £1,000 of vouchers saves you £200 of income tax and £120 of tax and gets you £410 more in working and child tax credits. This would effectively cost you £270. Compared to paying tax and NI then claiming 70% of the cost of the childcare means you need to earn £1,500 before tax to net £1,000 after tax and NI to claim £700 back. Costing you £300 in the end. It is just about always better to claim vouchers unless reducing your income would bring you below minimum wages or below the tax thresholds.

tinkerbellkirst

I have done the calculations for vouchers on the tax credits website using all our details it works out £900 a year worse off for us

It is only my work that offers the vouchers and it would bring me under the tax threshold, my partners workplace do not offer the vouchers.

Thanks

zagfles

tinkerbellkirst wrote: »

I have looked into Childcare vouchers but are not better off claiming them than Tax Credits.

As stated above as we are claiming for childcare costs the cut off limits are different but there is no clear limits on this.

My income is around £10900 part time.

My partners income will be around £21000 for full time (i think)

Our previous years income was £9600 ish for me and £18900ish for my partner.

Our income hasnt increased past the £10000 or £5000 disregard whatever it is this year. Does this mean our current award wont be affected? just next years?

That's right. Suggest you give them a ring towards the end of the tax year with an estimate so they get the run-on payments right.

Our Childcare costs remain the same, we get very little CTC anyway its mostly the childcare element we recieve.

Thanks x

If you get paid any childcare element you'll be getting max CTC.

zagfles

HappyMJ wrote: »

If you claim vouchers instead you would pay for them using before tax income. So getting £1,000 of vouchers saves you £200 of income tax and £120 of tax and gets you £410 more in working and child tax credits. This would effectively cost you £270. Compared to paying tax and NI then claiming 70% of the cost of the childcare means you need to earn £1,500 before tax to net £1,000 after tax and NI to claim £700 back. Costing you £300 in the end. It is just about always better to claim vouchers unless reducing your income would bring you below minimum wages or below the tax thresholds.

Nope - there's also this situation where the OP's income has gone up. In this case vouchers would likely be a bad idea (at least for this year) since the reduction in taxable income through taking the vouchers might not increase tax credits at all, or only part of the amount would.

It used to be advantagous to take vouchers in alternate tax years (if you could) but since the introduction of the disregard for income falls it's a more complication calculation...