Tax credits and property income from last yr

Jet

Can anyone tell me how renting out a property for part of the current and all of the previous financial year will affect a claim for tax credits?

The same property is now about to be lived in again and was only rented out whilst living with partner. Relationship has now failed and she needs to move back into the rented property. No tax credits were claimed as a couple.

Income is now half what it was when the property income was included as her income.

Just wondered what happens with regards to claiming tax credits?

Notmyrealname

All but £300 of the net profit is counted as income no different than from employment and the tax credit award will be reduced accordingly. If there was no tax credit claim in the 2011-2012 financial year then any rent from that is irrelevant. All that matters is the rental income from 6/4/12 to 5/4/13.

Jet

Thanks. Isn't the claim based on last financial year though?

dori2o

Sorry, the OP seems a little muddled.

Let me see if I have this right.

Last year you were in a relationship and living together but not ckaiming TC.

That relationship has now ended and you are now living alone and looking to claim tax credits as a single person.

If that is correct the answer is to only show the income on the claim for that is yours, you don't include anything that was your partners.

So if your income last year was £10k but the household income was £25k due to her income and her property income, then when you make the claim you show your previous years income as £10k.

IF however you are saying that the property income was split 50/50 (so you had a half share in the property) then you show this income, less £300 that is disregarded.

once your claim is up and running you can advise the tax credits office that you no longer have that income and give them a better up to date estimate for this year.

Jet

The property is mine and was rented out while I was with my partner living in his home.

I am now single again and will be living in the house that was previously tenanted (for all of last yr and some of this).

Obviously I no longer have the property income but I'm disappointed to understand that it will be taken into account for tax credits purposes even though my income is substantially lower now.

Jet

I'm not taking my partners income into account in any if these calculations but as the house is mine, I received the rental income.

dori2o

OK then, in which case you complete the form showing your full employment/self employment income, and all but £300 of all other income, from the previous year.

When the form has been processed and your award issued, you can then call the Tax Credits Office and give them a revised estimate of your incomes for the current financial year.

This will generate a new award notice based on the revised figures.

Don't try and use this years figures on the claim form as the Tax Credits Office now has full access to self assessment and PAYE records to check against them.

It is a bit of a long winded process in order to get the correct amount of TC, but it is the correct way of doing it.

A word of warning however, always estimate in the high side. If you reduce your income too far you will be in an overpayment position come the year end.

Jet

Is there not space on the form to input current earnings if they are going to be different to last financial year?

zagfles

Jet wrote: »

Is there not space on the form to input current earnings if they are going to be different to last financial year?

No. You give last year's earnings. You get an award based on that (might be zero). You then phone them up and give them your estimate for this year. They adjust your claim. Yes it is a crap system.

Note there is £2500 disregard for income falls. Also note that if you give an estimate that turns out to be too low you will have an overpayment.