Tax credit question

fabforty

I am asking this on behalf of a friend. I thought I knew the answer but now I am confused. Apologies if it has been asked before, I did search but couldn't find the answer.


My friend is due to return to work in December, after two years at home as a SAHM. She is a lone parent (widowed) with one child so currently receives IS/HB/CTC/CB. When she returns to work her salary will be £32k, giving a net monthly pay of £2050. She assumed that she would not be entitled to benefits on her salary. However as she will only be working for 4 months of the year her income from work for 2014-15 will be just under £11k. I thought that this meant that she would be entitled to claim wtc/ctc but she thinks not. A benefits adviser has said that they only count the period that she will be working; meaning that her pay is not averaged out over the full 12 months, and therefore her monthly take home pay would put her over the threshold. I always thought that tax credits were based on income for the whole year.


We tried putting the details into the benefits calculator and it does give an entitlement figure but this is followed by a line saying that as her income will have increased by more than £5000 on last years, she needs to get an in year assessment to avoid overpayment. Which seems to suggest that the figure given might not be correct.


Can anyone confirm if she would be entitled to WTC and or CTC for those 4 months, or not? We assume that any claim would end at the start of the new financial year.


Thanks.

northerntwo1

Yes and no

Yes it's based on 11k so she will get some but she's being paid on zero now. What she's already received will be taken into account, so all her tax credits for the year are counted.

northerntwo1

blondebubbles wrote: »

Tax credit base on the tax year rather than the salary. It is also based on gross income, not net.

If someone's income increased from £0 in 13/14 (income support isn't counted as income) to £11,000 in 14/15, the first £5000 is disregarded so the claim will be based on £6000. She would be entitled to WTC and CTC.

If the rules don't change and 14/15 income is £11,000 and 15/16 income is £23,000 then the claim would be based on £18000. This is too high for WTC but still fine for CTC although at a reduced rate.

The limit for CTC for one child is £26,000

OP says 15/16 s £32,000 not 23,000.

fabforty

Ok, we understand now. Thank you for explaining.