'Nil' tax code & IPA?

Sunrise2010

Want to enter into all this with my eyes open:
Bankruptcy.

I have just read on here that after filing for bankruptcy, you still have to pay back any disposable income. is this for 12 months or 3 years?

When is the 'Nill tax code' applied? I work part time - £1400 per month. would this apply to me? how does it work?

A large percentage of my outgoings are currently tied up in nursery and childcare fees. My daughter goes to school next September so these outgoings will stop and I will be in a much stronger financial position. Also hoping to get a pay rise in a years time :T (well we can hope!) so want to know how it will affect things.

Many thanks

National_Debtline

Hello sunrise

An IPA can continue for up to 3 years. Even if you are discharged from the bankruptcy itself after 12 months - as is usually the case, the IPA will continue beyond that if it can.

Re: the nil tax code, your employer's payroll dept will be advised that your tax code is changing to zero for the remainder of that tax year, so that salary payments can be processed correctly. Any surplus earnings which arise as a result will be claimed by the Official Receiver.

This is not to say that your employer will know you've been made bankrupt. There are many reasons for which a tax code can be adjusted in this way - the precise reason will not be disclosed to your employer.

Hope that helps

Dennis @NDL

National_Debtline

Hi again

Should have added link to the Insolvency Service's leaflet on all things IPA-related which will be useful reading for you:

http://www.bis.gov.uk/assets/insolvency/docs/publication-word/ipa-ipo.doc

Regards

Dennis @NDL

Sunrise2010

thank you so much for your replies- very useful.

For 12 months or so my circumstances will not be changing so i cannot see i will have any disposable income - other than that caused by the nil tax code - but after that, would i then have to phone someone to say that things have changed? how do i prove my income / outgoings etc - they see bank statements or do they monitor bank accounts anyway? (what i don't want is a big bill at the end of three years!)
are there any implications of not paying any tax? is this then owed back in subsequent years so you have a higher tax code? does this also happen on an IVA?

TheGardener

The NT code simply puts the money that would have gone to HMRC into your wage packet. The OR will arrange for a 3rd party (Moon Beaver and Clarke Willmott are the usual ones).to collect it from you.

It maybe, depending on what your income is that you actually get to keep a little bit of the tax money - the OR will tell you and the 3rd party how much you have to pay.
The NT code will end on the last day of the financial year or if you change employers in the meantime, then you will go back to paying tax normally.

The IPA will need to be set up before your automatic discharge so if your income rises before then, you may still end up with an IPA for 3 years (so I guess if you don't have a pay rise before AD it might be helpful?)

At any point before you are AD, if there is a change (up or down) in your income you should let your OR know within 21 days - that's all you have to do. If the OR wants to arrange/change your IPA the ball is in their court to do so.
If you have no IPA you will not need to notify the OR of a change in income after AD

Sunrise2010

Thanks for reply. You say about informing of hange in incomings- I assume the same is for change in outgoings? When's daughter starts school - probably about 4 months before my 12 months is up, my outgoings should drop by about 300pcm.. will this then mean I end up paying IPA equivalent to this for subsequent 3 years?

TheGardener

If your income or expenditure change - up or down - you will need to inform the OR. Are you sure the childcare costs will drop that much? I know I thought mine would but I found before and after school care plus the cost of school dinners were almost as expensive as day care! (..and that was 15 years ago!)

"When's daughter starts school - probably about 4 months before my 12 months is up, my outgoings should drop by about 300pcm.. will this then mean I end up paying IPA equivalent to this for subsequent 3 years?"

Yes, that is entirely possible. You should look at your change in expenditure carefully though, school age children usually start to get more expensive - not less :eek: Make sure you balance the budget before you tell the OR you are £300 a month better off. I'm guessing uniform, shoes, coats and PE kits will have to be budgeted for and bought and remember to calculate the cost of holiday day care, school are 'closed' for 3 months a year and that excludes the 'snow days'! - these costs need to be factored in and should be averaged out over the term too. You may be surprised how little your expenditure actually drops...

Sunrise2010

Thanks for your reply. I will have to work out the total annual cost for holiday clubs / breakfast clubs/ after school clubs and then work out the average monthly cost? I was thinking, if My 12 months are up in December, school starting in September they would only consider my monthly outgoings at this exact time - not the fact that later in the year I would have half terms an then the following year the nightmare of summer holidays too. An they also take into account uniforms and stuff? That is good. Was also worried about unexpected bills- if my oven breaks, I need new work clothes, clothes for my daughter, prescriptions, scary dentist fees, I really should get a wardrobe for my daughter too, and small things like a toaster etc etc.
What happens with things like this- should I work out a monthly average over the year and submit it before I go BC or just inform of the difference monthly?
At the moment I have only allowed for £75 pw for food.
When my daughter starts school I will also need to buy a car - which I know has be be of very low value but wondering how I save for this if all extra income has to go straight back to them. Are they quite understanding about this kind of stuff or is it very black and white for first 12 months - that every penny must go straight to your creditors?
I am sorry for all the questions just still petrified of it all and no idea if doing the right thing...

TheGardener

The OR will work on your current income/expenditure to set (or not) your IPA - at the point in the future when your income and expenditure change, then you need to do your maths on how much childcare/dinners /uniform etc will cost you and build them into a monthly budget before you notify the OR of the changes. If the OR decides at that point to initiate an IPA, then you will have the figures to negotiate an 'agreement'. What I'm trying to say is; don't just tell the OR " I have £300 a month more now" because you probably wont have.

If you manage to scrape enough together for a low value car - then you will have the running costs of the car to include in your revised SOA as well.

Concentrate on what your SOA is now and worry about the changes when they happen.