Tax Credits - Redundancy/Uni/New Career

Wellgood

My partner is about to be made redundant this month therefore we will be ringing HMRC to inform them re child tax credits and our estimated reduced household income for the rest of this tax year. My partner is hoping to do a 1 year PGCE starting September 2015 to qualify as a school teacher.


Questions:


1) Will HMRC base our new calculation (next month when we ring them) on our new estimated 2014-15 income now? Or will we have to wait until April 2015 for any changes to be made?


2) Once my partner graduates we are hoping she will get a full time teaching post in September 2016. Our household income 2016-2017 will therefore increase massively due to her new salary - ie an extra 21k pa. Will this mean an inevitable overpayment of tax credits will have been received in tax year 2015-16 when my wife is/was at university?


Just trying to plan ahead and avoid overpayments being made.... though can't see how this can be avoided unfortunately as we'll need all the CTC's we can get to get through the uni year.


Thanks.
Wellgood

amiehall

If you ring to report your partner is not working and give a new income estimate, the change will take effect immediately. Make sure you don't underestimate the income though as that could lead to an overpayment.

If you know your partner will start working part way through the tax year, at the start of the relevant tax year, give an estimate of the income as soon as you can (again making sure your estimate is high enough) then update the work details once she actually starts. This will minimise any overpayment.

I can also see that you're a bit confused about what year is affected by making changes. To confirm, starting work in Sept 16 has NOTHING to do with your award for 15/16. Once your renewal is done, under normal circumstances, any previous year is closed and dealt with.

Wellgood

Thanks for the prompt response.


I am confused about your last paragraph.....would we not be penalised as our household income would increase well over the 5k disregard?


Apologies if I appear a bit naïve!

Wellgood

Thanks Bubbles.


Household income:


2013-2014 = £43,158
2014-2015 = £35,304
2015-2016 = Circa £16,000
2016-2017 = Circa £30,000 (presuming a new job in Sept 16)


We have three children who attend childcare.

Wellgood

Hey, still a bit confused. Tax credits we are receiving now (14/15) are based on 13/14 p60 income (always a year behind). This figure can not now change as was period Apr 13 - Apr 14. So how come if get made redundant in 14/15 will effect 14/15 tax credits as i they are based on non-changeable 13/14 data.. If they always calculate on previous year figures would getting made redundant in 14/15 not effect 15/16 tax credits? ? But then I guess this would lead to inevitable overpayment. Just getting confused on when they calculate on last years figures and when they calculate on this years figures.

zagfles

Tax credits are only based on previous year income if current year income is within a buffer of £2500 less then previous year to £5000 more.

If current year income is not within this band, then it's based on current year income plus £2500 (if income has fallen) or current year minus £5000 (if it's risen).

Eg if previous year income is £20,000. Tax credits this year will be based on £20,000 only if current year is between £17,500 and £25,000

If current year is below £17,500 then it's based on current year plus £2,500
If current year is above £25,000 then it's based on current year minus £5000