Child Tax Credit - various queries.

princessdon

Actually from google it looks like they do include them which as you say is very very unfair as its deducted at source.

krusher

princessdon once again thanks for your reply

so we are penalised for having a company car , no wonder so many people dont work, we would be better off both of us not working

Icequeen99

krusher wrote: »

princessdon once again thanks for your reply

so we are penalised for having a company car , no wonder so many people dont work, we would be better off both of us not working

But surely you're not. I don't understand why you think you are being penalised.

The reason they are taking it into account is that you are being given a car instead of cash. Of course, it may be it would be better all around to have the cash but that isn't relevant here.

Take two people who work in Sales. Mr X gets £30,000 and has to use his own car. Mr Y gets £25,000 and a company car.

Mr X is taxed on his £30,000, Mr Y is taxed on his £25k and his company car.

For tax credits - it wouldn't be fair to pay Mr X based on £30,000 and Mr Y on £25,000. The value of Mr Y's package could still be around £30,000 it is just he is not receiving it all in cash.

If they didn't include it for tax credits, employers could give all sorts of benefits in kind to reduce the salary and people could claim tax credits to top it up. It just isn't fair.

As I said, it may be that Mr X is better off as the tax Mr Y pays and the value given to the car for tax credits may be more than the car actually costs but that doesn't make how it is treated unfair it just means based on your circumstances you are better off not having a company car (although I realise that may not be a choice).

Am I missing something?

IQ

princessdon

Icequeen99 wrote: »

But surely you're not. I don't understand why you think you are being penalised.

The reason they are taking it into account is that you are being given a car instead of cash. Of course, it may be it would be better all around to have the cash but that isn't relevant here.

Take two people who work in Sales. Mr X gets £30,000 and has to use his own car. Mr Y gets £25,000 and a company car.

Mr X is taxed on his £30,000, Mr Y is taxed on his £25k and his company car.

For tax credits - it wouldn't be fair to pay Mr X based on £30,000 and Mr Y on £25,000. The value of Mr Y's package could still be around £30,000 it is just he is not receiving it all in cash.

If they didn't include it for tax credits, employers could give all sorts of benefits in kind to reduce the salary and people could claim tax credits to top it up. It just isn't fair.

As I said, it may be that Mr X is better off as the tax Mr Y pays and the value given to the car for tax credits may be more than the car actually costs but that doesn't make how it is treated unfair it just means based on your circumstances you are better off not having a company car (although I realise that may not be a choice).

Am I missing something?

IQ

Because mr x gets full personal allowance?

Perhaps a fairer way is to say value is £4000 p11d value means £800 loss so £3200 is the value added to the claim.

Icequeen99

princessdon wrote: »

Because mr x gets full personal allowance?

Perhaps a fairer way is to say value is £4000 p11d value means £800 loss so £3200 is the value added to the claim.

They both get the full personal allowance.

The restriction on the tax code for Mr Y is because that is how they collect the tax on the value of the company car.

Mr X gets taxed on £30,000 less his PA. Mr Y gets taxed on 25,000 less his PA. However Mr Y has a cash equivalent of say £5000. To collect the 20% tax on the cash equivalent they do it by altering the tax code.

Basically they can take 20% from Mr X's £30k, but they can't take 20% from a car!

The tax code is just a way of collecting tax on the value of the car.

If you do the full tax computations for both you will see that they both in effect get their full PA.

IQ

Stroller133

I have bought this back to life as its a continuation of the previous questions I raised last year. I didn't go into teacher training, so the Child Tax Credits did not increase during this tax year.

However is there someone who understand the system that can confirm I understand the awards and disregards correctly:

Applied in April 2013, 2012/13 calculated (P11D, Gift aid, maternity pay corrected) income was 29.5k. £29.5k would have been used as to calculate the 2013/14 award.

Actual salary in 2013/14 is likely to be £26.5 - £27k. Before dealing with next years award the 13/14 year will be settled - if it turns out to be 27k or more no change will occur due to the 2.5k disregard. However if it is £26.5 we will be awarded an extra payment based on a £500 lower income - is this correct?

Now for 14/15 award the £27k will be used to calculate payments, so they will increase from last years (£29k - corrected). However 14/15 income is likley to be increased, best estimate is £31k, as this is within 5k am I right in thinking 14/15 will not be decreased?

A bit of a way off and unclear if CTC will still be payable but in 15/16 they will use £31k, so the payments will drop right down - at current rates perhaps a few pounds every 4 weeks for 2 children.

Stroller133

Thanks for that re-assurance I'm thinking along the right lines.

Do you know if our income looks likely to go up by more than 5k, will they reduce payments mid year - as I'm sure is the case with most people I don't want to face a massive overpayment to pay back! Especially as if our income goes much above £32k there will be no award in 15/16 so any overpayment would have to be funded from our earned income.