Confused about tax credits

later

Hi, thanks in advance for any help. I'm really confused about how something works, so maybe somebody can word it differently to help, please?

Right now, I'm technically on £0 as I get a student bursary. In October I start my first job in years. My salary will be about £25k. I currently get child tax credits so need to phone up on the day I start my job.

I went onto entitledto.co.uk and did two scenarios.

1. I have been in this job since the last tax year.
This led to an entitlement of something or the other, £350 a month I think, in combined tax and child tax credits.

2. I have started this job after 5th April 2014 and my income was zero last year.
This led to a massively higher amount of tax credit entitlement.

This makes me hiiiiiighly suspicious, as you can imagine. Does this mean they're going to pay me the higher amount, based on last year's zero income, then later declare overpayment through the nose, that I will need to mortgage a kidney to afford? Or will this money not need to be paid back and it's just extra at first to lower in the next tax year without repercussion?

EDIT: Am I just being an idiot, and the entitlement is actually higher because they're basing it on six months (start until April) pay over a 12 month period?

sulkisu

later wrote: »

Hi, thanks in advance for any help. I'm really confused about how something works, so maybe somebody can word it differently to help, please?

Right now, I'm technically on £0 as I get a student bursary. In October I start my first job in years. My salary will be about £25k. I currently get child tax credits so need to phone up on the day I start my job.

I went onto entitledto.co.uk and did two scenarios.

1. I have been in this job since the last tax year.
This led to an entitlement of something or the other, £350 a month I think, in combined tax and child tax credits.

2. I have started this job after 5th April 2014 and my income was zero last year.
This led to a massively higher amount of tax credit entitlement.

This makes me hiiiiiighly suspicious, as you can imagine. Does this mean they're going to pay me the higher amount, based on last year's zero income, then later declare overpayment through the nose, that I will need to mortgage a kidney to afford? Or will this money not need to be paid back and it's just extra at first to lower in the next tax year without repercussion?

EDIT: Am I just being an idiot, and the entitlement is actually higher because they're basing it on six months (start until April) pay over a 12 month period?

^^^This.


You start work in October, therefore your gross income for the financial year will be just over £12,000 (£2,080 x 6 months). Your tax credit award for this year will be based on that figure, minus any disregard. If you had started work in or before April, your gross income for the year would be £25k and tax credits would be based on that figure, hence the difference.
There are a couple of benefit experts on here who can explain it a lot better than I can, but that is the gist of it.
Also note that if your benefit assessment included an amount for HB, this is likely to be wrong as HB is based on your weekly income (£480), not your income for the financial year of £12k.


Coincidentally, I asked a similar question on behalf of my SIL a few months ago.
https://forums.moneysavingexpert.com/discussion/comment/65415619#Comment_65415619

Icequeen99

When you start work, you will need tell them your estimated income for the rest of the year. If that is 6 months in it will be 12.5k.

They disregard the first 5k of income rises, so your 14-15 payments will be based on an income of 7.5k so you will get maximum CTC (same as you have been getting) and some WTC if you are working enough hours.

However from April 15, you will need to tell them that your 15-16 income estimate is 25k. They will then revise your payments to be based on 20k (again disregarding the first 5k rise). You will lose the WTC (presuming you have no childcare) and you will get less CTC. It won't be until 16-17 when your payments truly reflect your 25k salary by which time your CTC will reduce again.

IQ

later

Ah brilliant, thanks, that makes sense.

And I know about the HB income. I'm not sure I'll get that, we'll see if I'm struggling.

Thanks a lot again