Can my income really increase by £25K without affecting tax credits

mrsm

My tax credits for 2006-2007 were calculated on a estimated income as I was on maternity leave.
During that time I was made redundant and so my earnings were higher than expected due to payment in lieu of notice.

I called to advice them and they told me we can earn up to £25k more without it affecting our payments. Surely that's not right .

I dont want to have to pay loads pack this year (last year I had to pay approx £600 back as final income was £3k higher than estimate) so surely I've been overpaid again. Any one shed any light on this please?

emmie1234

Hiya, doesn't sound right to me. We earnt about £2500 - £3000 more than our estimate last year and a result of this in Janury they stopped my child tax credits altogether and have only just started paying them again!!
Hopefully someone on here will be able to give better information!!

Em

mrsm

seems totally crazy doesn't it. I think he just didn't want to fill the info out when I'm due to get the end of year declaration thingy soon anyway

cifpower

It is correct - it was changed in the 2006 Budget. It used to be £2000 but it was thought that it created too much extra paperwork. However, the tax credit award for the following year will be a lot lower.

jane45

Hi, I am in exactly the same situation. My husband has changed jobs and his income has increased from £10000 to £18000 my wages are the same. He rang the tax credit helpline last week to tell them about the change and they said it wont affect us this year as it is based on last years salary. I didnt think my husband had got it right so I rang them this morning. And he was right!! Apparently earnings can go up from £10000 to £56000 and your tax credits wouldnt be affected. Seems absolutely crazy to me but thats the way they do it.

Jane

MissBehaving

From bitter experience - i would not trust anything that Tax Credits say to you.
Our income jumped about £20k two years ago and because they calculate thier figures a year in advance they continued to pay us even though we had phoned and queried.
We are now paying £11k back!!!!!!!!!!!!

If I were in your shoes I would phone again, write to them and then ... if they still say that everything is correct - put the money in a savings account without touching it!! That way if they 'are' wrong you wont be in the same situation as us!

mrsm

Jeez I can see this getting mighty confusing. They've always calculated on an estimate for the year to come, ie from Apr 07-Apr 08 as I've been on maternity leave almost constantly since Oct 03, so my predicted earnings for the 1st year we got tax credits were much lower than the year they should have used to calculate iyswim.
This year our income will be even lower than last year (a guestimate 2006-2007 that was only slightly higher than guessed) so god knows what they'll calculate it on.

Edited to say - sorry to hear about your situation misbehaving. sadly you're not the only one i've heard say things like that. Thankfully our jump in earnings was only a couple of thousand so hopefully they dont !!!! up too much

kurjam

i was told that if your earnings go up by £25,000 or less you dont have to tell them...
but i spoke to another person and was told that if you tell them your income is changing (even though you dont have to) they will send you a new award notice that take the changes in to effect so you will not have a large overpayment the next year !!!

DazzerG

There are already various threads with information on them about the £25,000 disregard.

You can earn upto £25,000 more in the current tax year than you did in the previous year and it wont affect the amount you receive that year.

However at the start of the next tax year your entitlement will then be based on your increased income.

basically;

05/06 income = £10,000, Tax Credits = £2,500 (made up figures for illustration only!)
06/07 income = £30,000, Tax credits still £2,500 pa
07/08 income = £30,000, Tax credits now £545 pa

There is one crucial thing to remember though;
Advise HMRC of change of income as soon as possible, but no later than the end of the tax year otherwise they will continue paying you at the old (higher) rate when the new Tax year starts upto when you complete your Declaration.

okra

Can I ask what would happen if you were to start a job with increased earning mid-year? Would it be;

05/06 income = £10,000, Tax Credits = £2,500 (made up figures for illustration only!)
06/07 income = £20,000 (6 months at 10k, 6 months at 30k), Tax credits still £2,500 pa
07/08 income = £30,000 (12 months at 30k), Tax credits now £1200 or whatever pa
08/09 income = £30,000 (12 months at 30k), T c now £545pa

Or would the 07/08 TC be £545 straight away?

DazzerG

Yes, you are correct.
Hope this explains it better;

05/06 income = £10,000, Tax Credits = £2,500pa based on income of £10,000
06/07 income = £20,000, TC still £2,500pa based on 05/06 inc of £10,000 (as the increase isn't more than £25,000)
07/08 income = £30,000, TC now £1200pa based on 06/07 inc of £20,000.
08/09 income = £30,000, TC now £545pa based on 07/08 inc of £30,000.

This is a basic example of how it works.
Not as complicated as some people think.