Is Working Tax Credits basically a loan ??

spiritus

I set up my own small business after redundancy and really struggled to make it work.


My wife only worked part time and so we applied to see if we'd be eligible for Working Tax Credits.


We were and the payments made to us helped us to pay our household bills.


I made a decision earlier last year that the business simply wasn't working for me and so I started to look for work. I found a job in September and informed the tax office at the same time.


We've now been hit with an overpayment claim of £ 1505.00


Is the Working Tax Credit scheme basically a loan that is lent to people when they are struggling financially but has to be repaid back once they get themselves into a stronger position ? It seems that way to me.


At the time I was paid WTC last year, I was eligible to claim and the money was needed to help pay our bills. Do the tax office believe that the money from WTC is deposited into a bank account and not touched awaiting the inevitable overpayment request ?


They have offered to let us repay over 3 years but it is still a sizeable amount to pay back for us.


I really don't understand the whole concept of Working Tax Credits and the fact that if you strive to improve your financial position then the tax office will demand the money they have paid you back !

spiritus

blondebubbles wrote: »

No it is not a loan.

However it is not based on what you earn month on month but for the overall tax year.

I know it's not a "loan" per se but they DO pay money based on your situation at a given time but that money HAS to be repaid if your situation improves months down the line.


Effectively, a loan.

spiritus

blondebubbles wrote: »

If your income increass in the current year by more than £5000 from the previous year then yes there can be an overpayment.

However this doesn't happen in all cases.

It really depends on the circumstances of the claim and how the income has changed from the year before, what has been estimated etc.

Eg, someone earned £10,000 in 2013/14 and they informed tax credits they expected to earn the same in 2014/15 but by the end of the year they actually earned £14,000. There would be no overpayment as the change wasn't more than £5000.

However if the income ended up being £20,000 then they would be overpaid as it increass by more than £5000.

Thanks.


The advisor mentioned something about a £ 10,000 "disregard" when I asked at the start of the claim as I was worried about an overpayment occurring.


The system truly baffles me.........


28th July 2014 we receive a joint letter from the tax office with a statement for the tax year of 2014-2015. This states that "the Total tax credits you have been overpaid is £ 0.00" and that the "amount owed to us from previous years is £ 0.00"


One day later we receive another joint letter for the period 06.04.13 to 29.09.13 (the date I started my job) and this letter claims we have been overpaid by £ 1505.25.


I don't understand how one day we have not been overpaid and the following day we have

spiritus

blondebubbles wrote: »

Was it a continuous claim?

Yes it was.

spiritus

I started a new job and contacted the tax office of my starting date hence why the claim was curtailed.

spiritus

blondebubbles wrote: »

Going from one job to another would not required your claim to be ended. Unless there was a gap between jobs?

And if it was stopped 29/09/13 then you just have had to reapply to be getting it again meaning it was not a continuous claim.

Hmm this is where I get confused.


I went from self employed (earning very very little) to being an employee. I informed the tax office of my start date and was able to give them an accurate estimate of my income until the next tax year.


I presumed that the tax credit claim would end when I informed them of my new job as I would be earning over than "salary threshold"

camlo

Did you complete your renewal before july 14 to 'finalise' the claim - if not then they will consider the whole lot as an overpayment i think.

missapril75

blondebubbles wrote: »

If your income increass in the current year by more than £5000 from the previous year then yes there can be an overpayment.

However this doesn't happen in all cases.

Not to mention if there's no change or even a reduction there's no question of repaying.

Or no change for a few years and then an increase, there's no repaying previous years.