tax credits and wage cut

melly1980

Unfortunately I may have a large hours reduction that will reduce my salary by nearly 10K. I currently qualify for tax credits and therefore this will take up some of the slack.

If my understanding is right, if my next years wage (apr 14 - apr 15) is 10K less I will still get the same tax credits because it will be based on my Apr 13- Apr 14 pay.

Is there any facility to gain the extra tax credits for this forthcoming year at the time that I will be losing money?

Thanks

melly1980

blondebubbles wrote: »

Tax credits is based on your previous years income but they will take your current year income into account subject to income disregards. For a decrease in income it's £2500. So they'd take into account that your income has dropped by £7500 rather than the full £10000.

How many hours will you be working?

37 hours from 44

I find the above a little confusing, you say that it is based on previous years earnings but say that they will take into account current year.

My understanding is that they will imput the previous years data and I will continue to get that award (ie as if I was still earning that money) then the following year the award is based on the reduced figure less the disregard.

Are you saying that from April this year my award will be based on the lower salary.

nannytone_2

if you are losing 7 hours a week and its dropping your income by 10 k a year,, you must currently have an income in excess of 50k a year surely?

melly1980

blondebubbles wrote: »

It's be easier to explain if you could give your income figures for the years in question.

An example would be 13/14 income £30000, 14/15 income £20000. Due to the £2500 disregard for income decreases, tax credits will base your claim on £22500.

Its complicated since those extra hours are at a premium rate but not offically overtime. Therefore we can always reduce to our basic hours of 37 hrs.

The figures are rough however this is a guide.

We have 4 children hence why we qualify for a slight amount of TC's (£50 ish per month) on a taxable salary of ~43K

With the hours reduction I will be on 33K ish.

What I am looking at is if I will get the hike in TC's at the time that I lose the salary so that the loss is buffered. Or am I going to continue to get the TC's of someone earning 43K until April 2015

Thanks

melly1980

nannytone wrote: »

if you are losing 7 hours a week and its dropping your income by 10 k a year,, you must currently have an income in excess of 50k a year surely?

If you have ruled out other possibilities then yes.

I've explained it above.

melly1980

blondebubbles wrote: »

If your income was £43000 and going to be £33000 then tax credits would base your claim on £35500 (£33000 + £2500 income disregard).

Don't have access to a calculator at the moment to see what difference it would make

thanks

dont worry about the calcs....I am comfortable calculating it, I just didnt know if they base the calculation on the previous years salary and therefore I'd have to wait a year to get the extra.

zagfles

Though be aware that if your hours go back up sometime next year, you could end up with an overpayment (even if you tell them straight away). As long as you're aware of this it shouldn't be a problem, just check your entitlement and you may have to put aside some of the increase in income to pay your overpayment.