Child Tax Credit - various queries.

Stroller133

Hi.
Due to numerous current and planned changes I have lots of questions about Child Tax Credits.

A bit of background - up to Sep 09 me and my wife both worked full time and has combined income of c£42k. Our first daughter was then born and even using these salaries we qualified for family element and baby element.
My wife returned to work part time and a change slightly decreased my salary to joint of about £33k and we continued to recieve about £10 per week until March 2012.

I understand from this tax year with one child if you earn more than about 24k. I think the renewal form said if you earn more than x last year just sign and don't bother with detailed return.


Now we have 2 children (2nd is 3mo) and I believe the threshold is about 32k and we are just over this - never mind I thought. I have been looking at child tax credits for another potential change when I noticed that maternity pay has a £100 a week reduction in income for those weeks.
Can we now reapply as I think this years income when BIK, gift aid and maternity reduction is added upwill be about 29700 and we should qualify for about £20 a week.

I will see if anyone can advise on this situation before asking about our future plans.

Many thanks

Icequeen99

So did you come out of the system?

You can reapply now, but it can only be backdated 1 month.

When you say BIK reduction - what do you mean?

IQ

Stroller133

Sorry using my IPod and missing bits out. The BIK is an addition as I have a company car so need to add P11d value to salary. We make a fairly substantial gift aid payment and I have only recently learned that this can be grossed up and subtracted.

Stroller133

My next question is just trying to understand how child tax credit works. I believe it is just an award based on your taxable and other specified incomes over a whole tax year, rather than your specific circumstances or needs on a weekly or monthly basis.

For example if there is a 2 child family where one parent works and earns £120k/yr (unfortunately not us) and after 4 months of the new tax year they lose their job and earn nothing for the remaining 8 months, they will have an estimated income of at least £40k for the year so will not qualify for any payment until the following april, despite having no income for the remaining 8 months - have I got this correct? I understand depending on savings etc they may be able to apply for HB, Income support and JSA but not Child tax credits.

My second example is another 2 child family, last year they jointly earned £30k which I think would qualify them for about £17 per week. At the start of the year they expect no or little changes so this what they receive. No after 6 months of receiving this a change occurs meaning they will now only earn £22k over the whole year and this means they would qualify for £80 per week. Now would they only get £80 per week for the remaining weeks of the year, or would they receive a higher payment to account for the earlier lower payment - when they were on course to earn much more?

Hope this makes sense?

zagfles

Stroller133 wrote: »

My next question is just trying to understand how child tax credit works. I believe it is just an award based on your taxable and other specified incomes over a whole tax year, rather than your specific circumstances or needs on a weekly or monthly basis.

For example if there is a 2 child family where one parent works and earns £120k/yr (unfortunately not us) and after 4 months of the new tax year they lose their job and earn nothing for the remaining 8 months, they will have an estimated income of at least £40k for the year so will not qualify for any payment until the following april, despite having no income for the remaining 8 months - have I got this correct? I understand depending on savings etc they may be able to apply for HB, Income support and JSA but not Child tax credits.

Usually, but there is an exception where if they are eligible for certain means tested benefits such as IS, JSA(IB) then they get max CTC for that period, regardless of earnings over the rest of the year. It doesn't apply if they're only eligible for contribution based JSA.

My second example is another 2 child family, last year they jointly earned £30k which I think would qualify them for about £17 per week. At the start of the year they expect no or little changes so this what they receive. No after 6 months of receiving this a change occurs meaning they will now only earn £22k over the whole year and this means they would qualify for £80 per week. Now would they only get £80 per week for the remaining weeks of the year, or would they receive a higher payment to account for the earlier lower payment - when they were on course to earn much more?

Hope this makes sense?

They would only get it for the remainder of the year, but they would get a lump sum on renewal, They changed the rules a few years ago so that when you report a drop in income, they don't backdate the underpayment, this shows up as a "potential payment" which you get at the end of the tax year. This was following all the headlines about overpayments.

Though note there's a £2500 disregard for income falls, so someone who was on £30k last year and £22k this year would be assessed on an income of £24500.

annie1975_2

zagfles wrote: »

Usually, but there is an exception where if they are eligible for certain means tested benefits such as IS, JSA(IB) then they get max CTC for that period, regardless of earnings over the rest of the year. It doesn't apply if they're only eligible for contribution based JSA.

They would only get it for the remainder of the year, but they would get a lump sum on renewal, They changed the rules a few years ago so that when you report a drop in income, they don't backdate the underpayment, this shows up as a "potential payment" which you get at the end of the tax year. This was following all the headlines about overpayments.

Though note there's a £2500 disregard for income falls, so someone who was on £30k last year and £22k this year would be assessed on an income of £24500.

About the disregard.How would that work then if someone with 1 child(where the cut off is £26,000) earns say £25,000 they would be entitled to CTC on £22,500.Then the following year earned £26,000.Assuming it wasn't based on the previous years income ie:they was having it worked out on the income for that year,would they still be owed CTC on the £2500 disregard.(hope you understand what Imean)....If not then that would mean people are really being based on an income of £2500 less. Sorry meant to say it would be worked out on £27,500

Icequeen99

annie1975 wrote: »

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About the disregard.How would that work then if someone with 1 child(where the cut off is £26,000) earns say £25,000 they would be entitled to CTC on £22,500.Then the following year earned £26,000.Assuming it wasn't based on the previous years income ie:they was having it worked out on the income for that year,would they still be owed CTC on the £2500 disregard.(hope you understand what Imean)....If not then that would mean people are really being based on an income of £2500 less. Sorry meant to say it would be worked out on £27,500

It would depend on their previous year income. If they had income of £25,000 - it would only be based on 27,500 if their previous year income was above 27,500.

So if they had income of say 29,000 in 11/12 and in 12/13 income of 25,000, their 12/13 would be based on 27,500.

However their 13/14 would be based on 25,000. And if they actually earned 26,000 they would still have it based on 25,000 (i.e. their actual previous year income).

IQ

annie1975_2

Icequeen99 wrote: »

It would depend on their previous year income. If they had income of £25,000 - it would only be based on 27,500 if their previous year income was above 27,500.

So if they had income of say 29,000 in 11/12 and in 12/13 income of 25,000, their 12/13 would be based on 27,500.

However their 13/14 would be based on 25,000. And if they actually earned 26,000 they would still have it based on 25,000 (i.e. their actual previous year income).

IQ

Thats the bit that confused me the 12/13.Surely basing it on £27,500 would take them over anyway.

zagfles

annie1975 wrote: »

Thats the bit that confused me the 12/13.Surely basing it on £27,500 would take them over anyway.

Yes, so they'd get a zero award for 12/13, but in 13/14 they'd get some.

Icequeen99

zagfles wrote: »

Yes, so they'd get a zero award for 12/13, but in 13/14 they'd get some.

Indeed, and it would be important that they stayed in the system and not allow HMRC to take them out.

IQ

annie1975_2

Thanks IQ and Zagfles...Confusing isn't it.?