Working tax credits and total benefit cap?

drc

Won't it be easy to avoid the benefits cap (£500 per week) by simply becoming self employed and claiming working tax credits as wtc are exempt from the cap?

BigAunty

I don't know, really, but good point.

Perhaps another way is to pay the bulk of their income into an employers pension scheme if pension contributions are ignored? (I don't know if they are ignored or not under UC or the current pension contribution caps, I'm just speculating)

There was a thread on the pension forum by someone who worked out he could put most of his salary into a pension to maximise his benefits under the current benefit system and then retire early with a big fat pension...Not sure how UC is treating pensions or the current rules.

It's not just up to the claimant to decide they are self-employed - the HMRC provide advice to help people determine if they are truly self employed.

They can't just hope to switch from PAYE to self employment with the same employer, for example, as it's all about the type and conditions around the work that decides if it's self employment, not just whether they want to be self employed.

Has UC changed the abuse of the tax credits system where allegedly those operating a Limited Company only had to declare their dividends/salary but could opt to keep most of the company profits in their business bank account without this counting? May have remembered this wrongly.

UC has an expectation that the self employed earn at least the NMW from their business whereas some self employed WTC claimants have earned naff all since the inception of tax credits and do this to avoid the conditons associated JSA and retain their HB and so forth. Some people running hobby businesses, just token micro businesses to do the minimum to maximise their benefits may get a shock under UC which specifically says it wants to end long-term benefit dependency by the self employed.

princessdon

They are looking to close this loophole thank god.

BigAunty

princessdon wrote: »

They are looking to close this loophole thank god.

Is that relating to company directors of limited companies who can pay themselves a negliible salary and retain the company profits in their business bank account without it being counted for tax credits? Or another loophole.

Does anyone know the pension rules for the employed and self employed - i.e. how much of their income they can pay towards it? In other words, the maximum each could pay to legitimately reduce their income and maximise their means tested benefits?

How is UC dealing with pension contributions? Are the calculatioins based on gross salary or salary after pension contributions?

chelle_bell

It wont make a difference because when Universal Credits comes in, in April, all benefits will be combined into the one, and the cap will be on everything (HB/Tax Creds ect)

benefitbaby

chelle_bell wrote: »

It wont make a difference because when Universal Credits comes in, in April, all benefits will be combined into the one, and the cap will be on everything (HB/Tax Creds ect)

UC does not begin until October and then only for new claimants.

Existing benefit claimants will be reassessed from April 2014 onwards.

The benefit cap will not apply to:
- households where someone gets DLA (or PIP) or IIDB
- those in support group of ESA
- war widows
- working families (earning at least £430 per month)
- unemployed after working at least 12 months (will be exempt from the cap for 9 months

p00hsticks

benefitbaby wrote: »

UC does not begin until October and then only for new claimants.

It depends where you live - the initial 'pathfinder scheme' is still supposed to be starting in April for new claimants in parts of the North West

http://www.dwp.gov.uk/policy/welfare-reform/universal-credit/

princessdon

BigAunty wrote: »

Is that relating to company directors of limited companies who can pay themselves a negliible salary and retain the company profits in their business bank account without it being counted for tax credits? Or another loophole.

Does anyone know the pension rules for the employed and self employed - i.e. how much of their income they can pay towards it? In other words, the maximum each could pay to legitimately reduce their income and maximise their means tested benefits?

How is UC dealing with pension contributions? Are the calculatioins based on gross salary or salary after pension contributions?

Of course it doesn't deal with Limited Companies - they can still abuse the system

Pension rules are still 50K - so again open to abuse

It's only the Ebay and other "self employed" loophole that is being dealt with.

Still a lot of loopholes - but at least one has been closed.

daimonde

p00hsticks wrote: »

It depends where you live - the initial 'pathfinder scheme' is still supposed to be starting in April for new claimants in parts of the North West

http://www.dwp.gov.uk/policy/welfare-reform/universal-credit/

some pilot schemes are already up & running, generally feedback isnt great. ive heard from a national meeting this week theres a likelihood of more slippage of the launch dates & any initial start will be a bare minimum of benefits involved.


On the self employment, we have a few people declaring as self employed with nil income year on year so they dont sign on but get WTC & full HB/CTB, usually their declared work is basically a hobby. One proposal is an assumed minimum income is used regardless of whats declared to stop this happening.