Tax Credits Info

daff_duck

Can someone explain the income disregard of 25k and also how all these overpayments seem to happen? Do they base it on last years income or is it based on this years?

CIS

The £25000 threshold is there cover an increase in earnings for the 1st year, i.e
2006/07 you earn £10000
2007/08 you earn £20000

The 2007/08 earnings isnt more than £25K higher than 06/07 so in 2007/08 your tax credits are based on the 2006/07 income.
Once you get to 2008/09 they will use the total earnings of £20000 from 07/08 and apply the £25K threshold again when working out your 08/09 tax credits.

Even with this rule, there is a reason that large overpayments occur.

The reason for this is:
If you earn £10000 in 06/07, then you get to 07/08 and you tell Tax Credits you expect to earn £5000, then they will pay out based on £5000. At the end of the year if you actualy earned £10000, then you have been overpaid tax credits as you earned £5K more than the award was based on.

The £25K threshold only gives protection if you equal to or more than the previous years income.

daff_duck

So really they do award you on this years income? if you had only say £14,000- 06/07 but was expecting about 20,000- 07/08 the credits would be based on the 20,000?

CIS

As this years income is not more than £25K higher than last years, they use last years income for this years award.

TheWaltons_3

So, seeing as I only earnt 1500 last year... and they are paying up to 80% of our childcare costs... (hubby earnt 30k for the form as we took off pension cont)... really, they are overpaying me as I am working 32 hours a week.. so next year will have earnt almost 9k. So next year they will want this all back?

DazzerG

try this explanation.....

http://forums.moneysavingexpert.com/showthread.html?p=5026575#post5026575

Also I didnt quite understand your post about OH earning £30k???

CIS

So, seeing as I only earnt 1500 last year... and they are paying up to 80% of our childcare costs... (hubby earnt 30k for the form as we took off pension cont)... really, they are overpaying me as I am working 32 hours a week.. so next year will have earnt almost 9k. So next year they will want this all back?

The £25K threshold only applies if this yrs income is higher than last years - if this years income is lower then last yrs, they will use the estimated income from this year to work out your Tax Credits.