Working Tax Credits - Income Disregard

roseview

I'm quite a reasonably switched o person financially, yet I struggle to get my head around the WTC system so would welcome some guidance, at idiot level.

Current situation - OH works on zero hours and S/E basis so income fluctuates greatly each year. Sometimes we get, others we don't get WTC. No problems with that so far.

From April. OH will continue in same line of work. I will start work, taking on some of the S/E work he previously did.

I know I need to advise that I will now be working, of course, and will have a stab at what income I expect to earn. I will also be asked what OH expected income will be for 14/15. I have no idea at all so will have to base it on what he has earned previously minus what I'm taking from him. His taxable income is around £15K, on average.

My question here, I guess, relates to the situation with regards to disregard levels. It's not easy to explain but I think you will know what I mean.

If I am right that there is a disregard of £5000 for higher income in the tax year am I safe providing a slightly lower estimate of his income to cover some leeway in his earnings? If I provide a higher estimate, and he earns less am I right in thinking that, if he earns up to £2500 less than the estimate we won't be paid the difference?

Caz3121

If they base it on an estimate instead of the previous year then there is no disregard so anything earned over the estimate will result in an overpayment

roseview

Each year we provide figures for the previous year. However, when I tell them that I am going to return to work the figure I give them can only be an estimate as it is S/E. As my husbands income is variable I will only be able to give them an estimate also, or possibly the figure of what he earned 13/14 once I've got that to hand which won't be for a few months.

How do they handle part estimate, part PYI?

To a certain degree, I guess the household income will be the same, just allocated differently. As I am returning to work from long term sick I think I get the disability element, hence why it is worthwhile.

Icequeen99

Caz3121 wrote: »

If they base it on an estimate instead of the previous year then there is no disregard so anything earned over the estimate will result in an overpayment

That is only true if the estimate was lower than previous year by more than 2,500 and it is only true up to the level of PY income whereby the disregard for income increases would kick in.

IQ

Icequeen99

roseview wrote: »

Each year we provide figures for the previous year. However, when I tell them that I am going to return to work the figure I give them can only be an estimate as it is S/E. As my husbands income is variable I will only be able to give them an estimate also, or possibly the figure of what he earned 13/14 once I've got that to hand which won't be for a few months.

How do they handle part estimate, part PYI?

To a certain degree, I guess the household income will be the same, just allocated differently. As I am returning to work from long term sick I think I get the disability element, hence why it is worthwhile.

You will need to provide his actual 13/14 income by 31 July. If you can't then you will need to give an estimate of his 13/14 income and confirm actual by 31 Jan 15.

Estimates for 14/15 are dealt with separately and they are just that - an estimate so you just call and tell them what you think your 14/15 income for each of you will be.

You should be aware though that if you do estimate his 13/14 income until you get final figures, it could impact on your 14/15 claim if the actual is different to the estimate.

IQ

roseview

There is no problem in providing actual 13/14 by July in order to finalise that tax years claim.
I am interested in 14/15 claim year. That figure will be no use to them (and not available) when I contact to advise of my return to work as his income in 14/15 will be different, as it is every year.

I need to know what they will base payments on for 14/15 year, and how we stand at the end of the year when actual figures are known. Really don't want to get in overpayment situation but equally don't want to have lost out on entitlement if the £2500 disregard is in play.

Icequeen99

roseview wrote: »

There is no problem in providing actual 13/14 by July in order to finalise that tax years claim.
I am interested in 14/15 claim year. That figure will be no use to them (and not available) when I contact to advise of my return to work as his income in 14/15 will be different, as it is every year.

I need to know what they will base payments on for 14/15 year, and how we stand at the end of the year when actual figures are known. Really don't want to get in overpayment situation but equally don't want to have lost out on entitlement if the £2500 disregard is in play.

Ok, so assuming you will finalise 13/14 with actual figures before July.

Initially 14/15 will be based on 13/14 income (actual or estimated until you give the actual).

It will stay based on 13/14 income unless you report an estimated income. If your estimated income for 14/15 is higher than 13/14 by less than £5,000 or lower by no more than 2,500 they will not change the tax credits, it will stay based on previous year income.

If your 14/15 estimate is that your income will rise by more than £5,000 compared to 13/14, or fall by more than 2,500 they will change your 14/15 award to be based on your estimate.

When they finalise, they will do exactly the same comparisons between 14/15 and 13/14 using your actual 14/15 figures. The disregards will apply in exactly the same way.

IQ

roseview

Sorry but still confused!!

I will have to provide estimates in April as soon as tell them that I am returning to work. At that time they will ask me what I expect to earn and they will also ask me how much my husband is going to earn, I'm sure. Will they not then use those figures to work out our 14/15 entitlement, rather than wait until about June/July when they normally send us a renewal form? Especially as we will then become entitled to the disability element as well.
Although we are signed up for WTC at this present time we are not actually getting paid any for the 13/14 year due to income in 12/13, and previous over payments.

zagfles

roseview wrote: »

There is no problem in providing actual 13/14 by July in order to finalise that tax years claim.
I am interested in 14/15 claim year. That figure will be no use to them (and not available) when I contact to advise of my return to work as his income in 14/15 will be different, as it is every year.

I need to know what they will base payments on for 14/15 year, and how we stand at the end of the year when actual figures are known. Really don't want to get in overpayment situation but equally don't want to have lost out on entitlement if the £2500 disregard is in play.

Giving an estimate, whether accurate or not, will never change the total you end up getting. It will only change when you get it.

For instance if your estimate is too low you might get overpaid and have to pay some back. If it's too high you might be underpaid and get a lump sum at the end of the year.

But the amount you end up being entitled to always depends on actual income figures not estimates. You can't get extra tax credits by giving a low figure and you can't lose out by giving a high figure.

Icequeen99

roseview wrote: »

Sorry but still confused!!

I will have to provide estimates in April as soon as tell them that I am returning to work. At that time they will ask me what I expect to earn and they will also ask me how much my husband is going to earn, I'm sure. Will they not then use those figures to work out our 14/15 entitlement, rather than wait until about June/July when they normally send us a renewal form? Especially as we will then become entitled to the disability element as well.
Although we are signed up for WTC at this present time we are not actually getting paid any for the 13/14 year due to income in 12/13, and previous over payments.

Whether they use the estimates depends on what figures those estimates are compared to previous year income. If they are within the disregards, it will stay based on previous year income, if outside then yes they will use them.

But when you give actual for 13/14 in July, it could alter the award again.

The main point is, you cannot lose out on the disregards (as you alluded to in your post above) by giving estimates, you will still get the same benefit of the disregard. The problem with estimates is you risk overpayments if the estimate turns out to be too low.

IQ

diceydeb

Last year we had actual income of 14000 and they based our tax creds for this year on 14500 . Im guessing they added 500 as this is roughly how past years have increased in our household income. But come end of this tax year we have actually had 19200 ( mostly due to OH esa now being fully taxable as income whereas his IB was not countable at all) I informed them of the 19200 figure and just received a letter from them saying no change to this years award (assuming cos the diff was less than 5000....just!) Well 6 pages of confusing stuff but that was the outcome. Next years award has dropped by 40 quid a week though , but was expecting that. So yes provided your estimate is no more than 5000 under you should like us be ok