WTC 2013 Disregard

More4Less

Could someone please clarify a point for me........ When I submit my WTC paperwork in June next year (2013), giving them my actual earnings for this year (2012-2013), I will have a slight increase in earnings. Not exactly sure how much yet as I am self employed.

Will the increase in Earnings Disregard be £10,000 or £5,000. I know it is reducing to £5,000 but not sure if the change will be applied to 2012/13 earnings, or the following year.

Many thanks.

enabledebra

The disregard drops to 5000 from April 2013 so if income increases above this between 12/13 and 13/14 it will be taken into account.

annie1975_2

I know theres a disregard of £10,000 this year,but what sometimes confuses me is this..If someone earns a little bit extra this year,and when they come to renew next year,will the tax credits reduce because of the extra income.I beleive its 41p in the £..
So for an example if someone earns £18,000 and they get £40 a week now..if by April 2013 they have earned say £20,000,will they have had an overpayment of £820?....And does it work like that for any amount of increase.HR are telling people at my OH work that if they work over it wont Affect their tax credits at all,I think they are wrong,but if someone could clarify please.
Sorry to jump in on the thread..
Thanks.

More4Less

It's so confusing. The way I understand things is like this .......

If the increase in earnings is less than the disregard, then there will be no overpayment for the past year. If HMRC are not informed in time then there may be an over payment for the current year.

If the increase in earnings is more than the disregard then the overpayment will be caluculated thus ..... actual earnings minus the disregard. So if your stated earnings were £18,000 but actual earnings are £20,000 there would be no overpayment.

If your stated earnings were £18,000 but actual earnings are £29,000, with a £10,000 disregard the overpayment would be based on £1,000 of the earnings increase.

I hope this makes sense. I am not an expert, just another struggling mortal!

annie1975_2

So even though there would be no overpayment,next years tax credits would drop because earnings this year were more?..
Otherwise people would be working overtime and not having any tax credits taken off them is that correct?

enabledebra

The disregard rules are a bit difficult to get to grips with but there's a good guide to how it works.

http://www.revenuebenefits.org.uk/tax-credits/guidance/how-do-tax-credits-work/understanding-the-disregard/

annie1975_2

So looking at that it wont affect this years tax credits but would reduce next years.....Thanks,think Ive got it now.
So when HR are telling them it wont affect their tax credits,it really will affect them,by reducing next years...

zagfles

More4Less wrote: »

Could someone please clarify a point for me........ When I submit my WTC paperwork in June next year (2013), giving them my actual earnings for this year (2012-2013), I will have a slight increase in earnings. Not exactly sure how much yet as I am self employed.

Will the increase in Earnings Disregard be £10,000 or £5,000. I know it is reducing to £5,000 but not sure if the change will be applied to 2012/13 earnings, or the following year.

Many thanks.

It's £10k for increases between the 2011/12 and 2012/13 tax years, and £5k for increases between the 2012/13 and 2013/14 tax years. So if your income this year is £10k (or less) higher than last year's there won't be an overpayment.

zagfles

More4Less wrote: »

It's so confusing. The way I understand things is like this .......

If the increase in earnings is less than the disregard, then there will be no overpayment for the past year. If HMRC are not informed in time then there may be an over payment for the current year.

If the increase in earnings is more than the disregard then the overpayment will be caluculated thus ..... actual earnings minus the disregard. So if your stated earnings were £18,000 but actual earnings are £20,000 there would be no overpayment.

If your stated earnings were £18,000 but actual earnings are £29,000, with a £10,000 disregard the overpayment would be based on £1,000 of the earnings increase.

I hope this makes sense. I am not an expert, just another struggling mortal!

Yes, although just to clarify the term "stated earnings" could cause misunderstanding - if you mean the actual income from the previous year then it's correct, but if you mean any estimate you give them then it's not. The disregard does not apply to estimates.

This causes a lot of misunderstanding and confusion. For instance if you earned a good wage last year, then lose your job, ring TCO to tell them and give them an estimate for this year based on you being out of work, then you find work, you could end up with an overpayment even if you tell them everything straight away. The disregard does not apply to in-year increases in earnings, or increases over estimates.

zagfles

annie1975 wrote: »

So looking at that it wont affect this years tax credits but would reduce next years.....Thanks,think Ive got it now.
So when HR are telling them it wont affect their tax credits,it really will affect them,by reducing next years...

Yes. HR are talking rubbish. It used to be the case that if you had a one-off year of higher earnings it wouldn't make much (if any) difference to tax credits, because the disregard covered the year of higher earnings and the next year would be based on the lower normal earnings.

But now there's a disregard for income falls, so a one-off year of higher earnings will result in less tax credits the next year.