Why do HMRC pay credits four-weekly?

MegaMiniMouse

HMRC pay tax credits four-weekly, but reclaim their over-payments by monthly direct debit. Housing benefit is paid fortnightly, wages are mostly paid either weekly or monthly. Most bills are paid monthly.

Universal Credit will be paid monthly, and I think this will be its greatest improvement over the existing system. Four-weekly and fortnightly payments arrive on a different date every month, and once or twice a year there is an apparently random additional payment.

Little wonder, then, that so many people on benefits struggle to organise their finances effectively, and have to resort to the payday lenders.

I have recently taken over the financial affairs of my daughter, and I am learning a very great deal about her struggle to budget properly when, so far as she is able to understand, her income arrives in apparently random amounts and at apparently random intervals.

She works three shifts a week in a low-paid job, and has her two under-10s for 4-5 days a week. Her total income, including money from the children's father but not including child benefit, is more than £25,000 a year. This equates to a salary of well over £30,000. Her rent is £725 a month and her council tax is £862 a year.

She is loaded with money, but lives in near-squalor. It is arguable that, for her, the welfare state is more of a hindrance than a help because it removes any necessity for her to take proper control of her own life.

I am doing what I can to help her, and progress is being made.

[Deleted User]

its not rocket science to work out that if you for example get a benefit paid every 4 weeks that once a year you will get 2 payments in one month(start and end)
UC may well simplify payments to monthly but at what cost?total chaos seems to be the answer to that question

MegaMiniMouse

woodbine wrote: »

its not rocket science to work out that if you for example get a benefit paid every 4 weeks that once a year you will get 2 payments in one month(start and end)
UC may well simplify payments to monthly but at what cost?total chaos seems to be the answer to that question

To many people, it is indeed as difficult as Rocket Science to convert 13 four-weekly payments into 12 monthly payments. My daughter is not stupid, but like many people, she is terrified of numbers.

The council knows what my daughter's monthly rent is but, for 5 months out of every 6, they pay her less than what they have decided she needs in order to pay her rent. Every 6th month she gets a surprise additional payment.

Universal Credit is indeed struggling to get started but in the meantime, it would be helpful to allow claimants in general to select their own payment intervals - for HMRC etc this would not be Rocket Science.

dori2o

MegaMiniMouse wrote: »

To many people, it is indeed as difficult as Rocket Science to convert 13 four-weekly payments into 12 monthly payments. My daughter is not stupid, but like many people, she is terrified of numbers.

The council knows what my daughter's monthly rent is but, for 5 months out of every 6, they pay her less than what they have decided she needs in order to pay her rent. Every 6th month she gets a surprise additional payment.

Universal Credit is indeed struggling to get started but in the meantime, it would be helpful to allow claimants in general to select their own payment intervals - for HMRC etc this would not be Rocket Science.

It all depends on how you view the payment, as an annual amount or as a monthly amount. It's all in the mind as they say.

I view my DLA payment as a monthly income. I know for a fact that every month I am guaranteed £225. One month in every year (not once every 6 months as you suggest) I get a bonus (the double payment) which is normally put away for our annual holiday to Blackpool/Prestatyn in May. I know though in my mind that I will still get another payment in the following month, it'll just be a bit later in the year when it comes. That I feel helps me manage the issue better.

Other than UC there is no other state benefit that is paid calendar monthly. The state pension is paid weekly or 4 weekly, JSA/ESA is paid 2 weekly, DLA is paid 4 weekly, AA is paid 4 weekly, IS is paid weekly/4weekly. It's just the way it is and always has been.

UC being paid monthly for some will be great, especially if paid at the right time, i.e. I get paid monthly on the last working day of the month, if I get UC the it would be great to have it paid around the 15th of the month so that in effect we get an income every 2 weeks.

For some though who have never been on monthly pay (it's not only those on benefits,, a vast number of employers still pay weekly) will seriously struggle, especially the first month of the claim as I very much doubt it will be paid in advance. Just like all other state benefits it will be paid 1 month in arrears, so people will have to contend with 1 month without any money, living on their last weekly payment.

I know when I went from weekly to monthly pay at Brit Aerospace there was a 3 week gap between our last weekly salary and our first monthly. As a way to appease the employees all were given a £300 loan, only repayable if you left within 18 months of the loan being given, which was meant to make the transition less painfull. Great for those apprentices on only £80 - £150 per week, not so good for those time served staff on the shop floor used to getting close to £300 per week in their pay packet having to make £600 last 3 weeks where they were used to getting almost £900 in that same period.

Assuming UC is ever actually introduced fully, of which I have my doubts, then certainly for the first 6 months at least there will be many who have significant struggles with managing their money.

MegaMiniMouse

blondebubbles wrote: »

They can select it though, weekly or 4 weekly.

Yes, but for most people, it needs to be monthly.

TELLIT01

Currently most benefits and other payment from Government departments is paid x weekly. That way people know exactly how much they will get each time.
If benefits etc were paid monthly it would be nightmare for departments to calculate any potential over/under payment.
Would the payment vary depending on the number of days in the month etc?

MegaMiniMouse

blondebubbles wrote: »

You'd hadn't mentioned weekly, I wasn't sure if you knew

Personally I would prefer weekly. Wages are monthly and pays the bills so I'd like knowing I had something every week for food etc.

Would really depend on the individual circumstances as to what suits best. More of a conversation for discussion time.

The system I have set up for my daughter is that she allows one months income to accumulate in order to be able to fund the following month's expenditure. So it doesn't matter whether her benefits arrive in her bank at the beginning of the month, the end of the month, or at any point in between.

Her monthly spending money is divided into three equal instalments which she pays herself on the 1st of the month, the 11th of the month, and also the 21st of the month. This is as near as she can get to giving herself a 'regular' income.

Needless to say, I had to lend her some money in order to get the system up and running, but I will be repaid when she receives her 13th four-weekly payment.

MegaMiniMouse

TELLIT01 wrote: »

Currently most benefits and other payment from Government departments is paid x weekly. That way people know exactly how much they will get each time.
If benefits etc were paid monthly it would be nightmare for departments to calculate any potential over/under payment.
Would the payment vary depending on the number of days in the month etc?

Do monthly salaries vary according to the number of days in the month?

dori2o

TELLIT01 wrote: »

Currently most benefits and other payment from Government departments is paid x weekly. That way people know exactly how much they will get each time.
If benefits etc were paid monthly it would be nightmare for departments to calculate any potential over/under payment.
Would the payment vary depending on the number of days in the month etc?

No, because the amount would be calculated daily over 365 days and divided by 12.

However, in the case of UC it gets even more complicated as one months payment is calculated based on the previous months income from employment/self employment etc. So payments will fluctuate should a persons monthly income not be static, i.e.should they do overtime, should they be on commission, should they be on 'zero hours', should they be on term time without annualised salary etc etc.

MegaMiniMouse

dori2o wrote: »

No, because the amount would be calculated daily over 365 days and divided by 12.

However, in the case of UC it gets even more complicated as one months payment is calculated based on the previous months income from employment/self employment etc. So payments will fluctuate should a persons monthly income not be static, i.e.should they do overtime, should they be on commission, should they be on 'zero hours', should they be on term time without annualised salary etc etc.

Tax credits appear to be based, retrospectively, on the previous year's income and the final figure is decided upon at a later date. My daughter will be repaying HMRC's overpayments until 2022, and there is no guarantee that further overpayments will not be made.

Universal Credit, as you say, will be calculated monthly, and that will be hugely advantageous to all concerned.

dori2o

MegaMiniMouse wrote: »

Tax credits appear to be based, retrospectively, on the previous year's income and the final figure is decided upon at a later date. My daughter will be repaying HMRC's overpayments until 2022, and there is no guarantee that further overpayments will not be made.

Universal Credit, as you say, will be calculated monthly, and that will be hugely advantageous to all concerned.

The initial tax credits award of any year is based upon the previous years income as ou correctly state (though it is not retrospective), but there is never any reason for overpayment to occur as long as any increase in income, above the disregard is notified to HMRC as early as possible rather than waiting for the next renewal period.

It is every individuals responsibility to notify HMRC of income changes for tax credit purposes. If your daughter didn't do that then she has only herself to blame I'm afraid.