Tax credit award: zero

Loubbe

Last year (2011/2012) we received a letter asking if we wanted to cancel our tax credit award, as the combined earnings of my husband and I were just over what the new tax credit threshold was going to be in 2012/2013, as it had gone down. We elected to keep our tax credit award, but predicted our income as £33,000 per year. With 2x children, this would mean our award was zero because of our income.
Since then, my husband was out of work for a few weeks. As a result, our income fell by 2,500 this year. When we received our renewal pack, we filled in our income details, and were informed by the tax credit office that our award would be re-calculated using our actual income details. We have waited 8 weeks, and received a letter today telling us that our tax credit award for last year is zero. If you look on the tax credit calculator, the income threshold for a couple with 2 children is £32,200. This is also the info on THIS website. I don't understand therefore why my award is zero? Has anyone else had this? Are they taking something else into account?

Icequeen99

Loubbe wrote: »

Last year (2011/2012) we received a letter asking if we wanted to cancel our tax credit award, as the combined earnings of my husband and I were just over what the new tax credit threshold was going to be in 2012/2013, as it had gone down. We elected to keep our tax credit award, but predicted our income as £33,000 per year. With 2x children, this would mean our award was zero because of our income.
Since then, my husband was out of work for a few weeks. As a result, our income fell by 2,500 this year. When we received our renewal pack, we filled in our income details, and were informed by the tax credit office that our award would be re-calculated using our actual income details. We have waited 8 weeks, and received a letter today telling us that our tax credit award for last year is zero. If you look on the tax credit calculator, the income threshold for a couple with 2 children is £32,200. This is also the info on THIS website. I don't understand therefore why my award is zero? Has anyone else had this? Are they taking something else into account?

The reason for this is that the rules changed in April 2012. Previously if you had a fall in income from one year to the next, the lower income was used to calculate your award.

However, they introduced a disregard for falls in income in April 2012. So the first 2,500 of any fall is ignored. This means your income is still treated as being 33,000.

You will get something next year though providing your income doesn't rise again by more than 5,000.

IQ

Loubbe

Is that so? Can I ask how you know that, because no one at the tax credit office had said that to me, and I haven't found that info on the website. Also, is it exactly 2500? As that was a rough figure. I have added it up, our income fell by 2708. I will ring them, but in the past they have been less than helpful

Icequeen99

Loubbe wrote: »

Is that so? Can I ask how you know that, because no one at the tax credit office had said that to me, and I haven't found that info on the website. Also, is it exactly 2500? As that was a rough figure. I have added it up, our income fell by 2708. I will ring them, but in the past they have been less than helpful

I know that because it is part of my job to know. There is lots of information online about it including on the HMRC website including:

http://www.hmrc.gov.uk/manuals/ccmmanual/ccm1135.htm
http://www.hmrc.gov.uk/manuals/tctmanual/tctm05200.htm
http://www.hmrc.gov.uk/leaflets/wtc8.pdf

It was introduced from 6 April 2012.

If your income fall was 2708 then the first 2,500 is disregarded so they should use a fall of £208.

IQ

Loubbe

Thanks for the links. I had not looked there, was searching for information under the tax credits section of HMRC.
Reading that, though, I still don't understand why our award was zero. We earned under the threshold, and our income dropped by more than 2,500. I will ring them and try to clarify. It is very frustrating because I stopped our payments as we were afraid of being overpaid, but expected, because of our income drop, that we would receive an award.:(

Caz3121

as IQ explained in post 4. The first £2,500 of a decrease is ignored so they will be counting your income as £32,792 (£33k minus the £208)

Icequeen99

Loubbe wrote: »

Thanks for the links. I had not looked there, was searching for information under the tax credits section of HMRC.
Reading that, though, I still don't understand why our award was zero. We earned under the threshold, and our income dropped by more than 2,500. I will ring them and try to clarify. It is very frustrating because I stopped our payments as we were afraid of being overpaid, but expected, because of our income drop, that we would receive an award.:(

Because in tax credits terms you are still above the threshold. Your income for tax credits only fell by £207. So you are still above the £32,200 presumably?

What was your 12/13 actual income? That is really what is relevant and what is your 13/14 estimate.

There isn't really much more that tax credits can clarify that I haven't done already. You are above the threshold because they are treating your income as 2,500 more than it actually is.

However, if you think your estimate is below the threshold even taking account of the 2,500 disregard then contact them.

You should get something next year.

IQ

Loubbe

Our actual income was 30,900 for 12/13. It was 33,600 for 11/12.

Icequeen99

Loubbe wrote: »

Our actual income was 30,900 for 12/13. It was 33,600 for 11/12.

Ok, so your 12/13 award would be based on 33,400 - your actual income plus the 2,500 disregard. So you only really get £200 of the fall recognised.

But your 13/14 award should be based on 30,900 - your actual income for 12/13 so you should get a small amount of payment this year. You should have had your 13/14 notice through? That presumes of course that your income isn't going to rise by more than £5000 in 13/14.

IQ

Loubbe

Yes, I have sorted this current year. I am receiving this years taxcredits. Just would have been nice to get some for last year after our income took a bit of a battering. Thanks for your help!

JimmyTheWig

Icequeen99 wrote: »

But your 13/14 award should be based on 30,900 - your actual income for 12/13 so you should get a small amount of payment this year. You should have had your 13/14 notice through? That presumes of course that your income isn't going to rise by more than £5000 in 13/14.

And if the OP's income rises by, say, £5100 to £36,000 will they take into account all of that rise (so they get nothing) or will they disregard £5000 of it (as they do for when income drops) and award based on an income of £31,000?