WTC - relevant years...?

David333

I thought that I understood WTC but looking through my renewal form, I'm not sure if I do. My question relates to the relevant years.

I claimed WTC for the first time in 2012-13 based on an estimate of my income in 11-12. Now, in my renewal form they are asking me to confirm my income for 11-12 and estimate my income for 12-13. That implies to me that the WTC I was entitled to for 12-13 is based on my final income for 11-12. Is that correct?

Or, is my entitlement to WTC 12-13 actually based, in the end, on my 12-13 income? That would seem more logical but doesn't actually explain why I am having to confirm my 11-12 income when I did not claim at all in that time period.

Thanks!

zagfles

Are you self employed?

Your WTC is based on a combination of the current and previous year's income. Usually on renewal they'll ask for confirmed previous year's income, but if (eg) you're self employed or do a tax return you can give them an estimate but you must provide confirmed income by 31 Jan the next year (ie the self-assessment cut-off).

David333

zagfles wrote: »

Are you self employed?

Your WTC is based on a combination of the current and previous year's income. Usually on renewal they'll ask for confirmed previous year's income, but if (eg) you're self employed or do a tax return you can give them an estimate but you must provide confirmed income by 31 Jan the next year (ie the self-assessment cut-off).

No, I'm employed, although moved house in 12-13 and my fiancee started work so there were changes in circumstances.

It's not so much the question of an estimate versus final income.

It's just that in the end they've asked me for an estimate and final income for 11-12, which is a year I haven't claimed any tax credits. Does that mean that my tax credits for 12-13 are actually based on 11-12?

How can it be a 'combination of current and previous years'? I can understand why it would be this throughout the year in order to provide an estimate of how much you are likely to be entitled to this year (and therefore prevent under or overpayments). However, in the end, shouldn't my final entitlement be based solely on one year (either the previous year - 11-12 in my example - or the current one - 12-13)?

zagfles

David333 wrote: »

No, I'm employed, although moved house in 12-13 and my fiancee started work so there were changes in circumstances.

It's not so much the question of an estimate versus final income.

It's just that in the end they've asked me for an estimate and final income for 11-12, which is a year I haven't claimed any tax credits. Does that mean that my tax credits for 12-13 are actually based on 11-12?

How can it be a 'combination of current and previous years'? I can understand why it would be this throughout the year in order to provide an estimate of how much you are likely to be entitled to this year (and therefore prevent under or overpayments). However, in the end, shouldn't my final entitlement be based solely on one year (either the previous year - 11-12 in my example - or the current one - 12-13)?

No.

Initially tax credits are based on previous year's income. If current year income is significantly different it will be adjusted. Last year this meant if it's over £10,000 more or over £2500 less than the previous year. This year the disregards have changed to £5,000 more or £2,500 less. If the income change is greater than the disregard, tax credits will be based on current year plus (for drops)/minus (for rises) the disregard.

It sounds complicated but if you post actual figures we can tell you what income they use.

If you're employed with no complicated tax affairs you should be able to provide an confirmed income for 12-13 by now, you should have P60's etc?

David333

Mmmm...so it's based on current year income which is understood as previous year's income if current minus previous equals less than £10,000 for 12-13?!

Basic figures: total income of £8800 in 11-12, £14,800 in 12-13.

Does that mean that I'm within the £10,000 disregard and therefore the tax credits I got in 12-13 will be based on the 11-12 estimated (and subsequently, in this tax renewal, confirmed) figures? Basically, that everything's fine for 12-13 tax credits already received?!

And in 13-14, the current tax year, my tax credits will be based on 12-13 figures except if those figures actually increase by more than £5000 in actuality in 13-14?

zagfles

David333 wrote: »

Mmmm...so it's based on current year income which is understood as previous year's income if current minus previous equals less than £10,000 for 12-13?!

Basic figures: total income of £8800 in 11-12, £14,800 in 12-13.

Does that mean that I'm within the £10,000 disregard and therefore the tax credits I got in 12-13 will be based on the 11-12 estimated (and subsequently, in this tax renewal, confirmed) figures? Basically, that everything's fine for 12-13 tax credits already received?!

Yes, 12-13 will be based on £8800.

And in 13-14, the current tax year, my tax credits will be based on 12-13 figures except if those figures actually increase by more than £5000 in actuality in 13-14?

Yes. Or drop more than £2500.

David333

That's great. Thank you. It may be clear in my mind now!

HiToAll

That's what confused me too. Tax credits form asked me for last years income which worked out as 10,500 for the year, but this year it is 20,000 for the year 2013-2014.
I was just told to fill in the form with last years income and then phone them up and let the tax credits office know of the difference.

Horseunderwater

Yes that is correct. Tell them last years gross income from P60 or gross profit from self employment. Wait for the award to arrive then ring them up with revised estimated income. If possible slightly over estimate so that when end of this tax year arrives there will be no over payment to contend with.

David333

Horseunderwater wrote: »

Yes that is correct. Tell them last years gross income from P60 or gross profit from self employment. Wait for the award to arrive then ring them up with revised estimated income. If possible slightly over estimate so that when end of this tax year arrives there will be no over payment to contend with.

Just seen this reply... So I tell them 11-12's gross income and 12-13's gross income, but then ring them to (over-)estimate 12-13? Sorry, I'm slightly lost.

A second question: if I estimate £14,000 for 12-13 and actually earn £24,000, what happens? £5,000 would have been disregarded but that's irrelevant because I've earned more than that above the estimate. My actual WTC would be eventually be calculated on the final £24,000 and I'd be liable to pay back something...?

zagfles

David333 wrote: »

Just seen this reply... So I tell them 11-12's gross income and 12-13's gross income, but then ring them to (over-)estimate 12-13? Sorry, I'm slightly lost.

The PP meant estimate for this year ie 13-14. You have the actual for 12-13 don't you? So no need for estimate.

A second question: if I estimate £14,000 for 12-13 and actually earn £24,000, what happens? £5,000 would have been disregarded but that's irrelevant because I've earned more than that above the estimate. My actual WTC would be eventually be calculated on the final £24,000 and I'd be liable to pay back something...?

I presume you mean 13-14 above.

Assuming that, and your previous statement that 12-13 was £14800, then tax credits will be based on £19,000, ie this year(13-14)'s actual income minus the disregard.

The point is that whatever estimate you give doesn't change the amount you end up entitled to, which is always based on actual income, it just affects when you get it.