Tax credits and a one-off income increase (PPI interest)

Pleaseadvise

In the 2012 - 2013 tax year, we were able to reclaim some very old PPI payments, and the interest (before tax) came to just over £4000. I put this on the tax credits renewal form as you are supposed to do (I was all ready to give them copies of the bank letters and such, but they didn't ask for any more details at all, just the total).

There was no money to repay from the 2012 - 2013 tax credits - if I've understood properly, this is because of the £5000 income rise disregard? But the amount of tax credits we are getting this year has fallen.

So, what will happen at the end of the year? I have looked at this page - http://www.entitledto.co.uk/help/howtcswork.aspx
and I think that (assuming earned income is roughly the same, so the total is about £4000 less than last year) they will ignore the first £2500 of the fall, but there will be an underpayment because of the other £1500, so we'll be owed a bit extra at the end of the year?

If someone who understands this better could let me know, I'd be grateful! We've not had much of a change in any other year.

dori2o

phone them and update your current years income. Simply tell them the 'other income' will not occur this year.

That way you will get what is owed now, incuding anything you might lose if you left it til renewal time due to the £2500 disregard.

Pleaseadvise

I will do that then - is there any reason not to? I had a feeling that if you changed your amount during the year and something unforeseen happened, so your estimate was wrong, you could get into trouble - making it better to always leave it until the income for the year was certain. Perhaps that was just a rumour?

Icequeen99

Pleaseadvise wrote: »

I will do that then - is there any reason not to? I had a feeling that if you changed your amount during the year and something unforeseen happened, so your estimate was wrong, you could get into trouble - making it better to always leave it until the income for the year was certain. Perhaps that was just a rumour?

Indeed, if you tell them an estimate that turns out to be wrong you may face an overpayment.

The other poster who suggests telling them now makes a difference to telling them later with regards to the disregard is wrong. The disregard applies to estimates same as it does to actual incomes.

IQ

Pleaseadvise

Thank you. So if our wages rose, (there is no reason to expect that to happen, but you never know) would we be worse off, at the point of renewal next year, if I'd phoned them now and told them we won't be getting any extra income this year? Could we be considered trying to cheat?