Impact of back pay on childcare credits

Worrymo

Hi, I'm looking for any information/advice at all on a situation that's causing me sleepless nights.

I work full time with one child in full time childcare and have done for the last three years. I earn too much to get much working families tax credits but do receive the childcare element. This extra help is the buffer zone between working with my head held high and having to access a food bank. My budget is extremely tight so I am so grateful for this help.

My issue is down to Single Status and my job role being re-evaluated back in January 2012. I appealed against my re-evaluation and, after a long story which would be far too upsetting to go in to, my appeal was heard at the beginning of the month. I've just found out that my appeal was successful and that my back pay is being calculated and will be included in my March 'salary'. I've been given no indication of how much I will receive but, unbeknownst to me, the back pay is being back dated to 2007!

I was absolutely elated when I found out about this and I'd already started spending the money in my head (as you do): A holiday for my son, which I've never been able to afford before; a new washing machine; some new clothes etc.

Then I started thinking about tax and NI (which I understand would have been due if I'd received these wages in the year that they'd been earned) then I started thinking about my childcare credits and what impact this extra money would have on the amount of help I've already received so far this year. I reported my earnings for 2014-15 faithfully and now with this lump sum being received right at the end of the financial year, it's going to look like I've lied about my income and HMRC is going to want everything they've paid me so far this year back.

This is making me feel sick. It just feels so unfair that I'm being penalised for receiving several years worth of unpaid wages in one go where, if I'd received them in the tax year they'd been earned they wouldn't have had much of an impact on the childcare credits I received each year. It's like being given with one hand and taken away with the other.:(

I'd considered phoning HMRC today but they'll want 'figures' which I don't have yet. Payroll say the amount is yet to be 'finalised' as the calculation is extremely complicated.

Does anyone have any idea how this situation works, how much extra I can earn before it impacts on my childcare credits? I've had a look online but there doesn't seem to be any precedent for my situation.

Thank you in anticipation for any advice you can give me.

Worrymo

Thanks for your response blondebubbles; It's much appreciated.
I'd read in other posts about an increase of up to £5,000 not being considered in your final award notice. I think it's safe to assume that, because of the this being back pay over an eight year period, It's going to be more than £5,000. So I am going to be looking at repayment of this year's child credit.

You mention in your post that my 2015-16 claim will be affected. Will tax credits not take into consideration that this will be a one-off, never to be repeated payment??

notanewuser

You can't have it both ways. Your claims have been based on your lower (incorrect) salary for 7 years. This won't be reassessed. Having the money now means that it will impact on next year's payments. Surely you can see that that's right? The £5k buffer is pretty generous.

Worrymo

notanewuser wrote: »

You can't have it both ways. Your claims have been based on your lower (incorrect) salary for 7 years. This won't be reassessed. Having the money now means that it will impact on next year's payments. Surely you can see that that's right? The £5k buffer is pretty generous.

Hi thanks for your reply. I can understand what you’re saying, based on current tax credit rules, that’s the way it works but I don't think I'll ever be persuaded that it’s right! I suppose that's not HMRC's fault though.

Through no fault of my own I’m now receiving pay that I worked for years ago. I have only claimed tax credits since the beginning of 2012 regardless of whether they’ll be reassessed or not. What seems unfair about my situation is that my income would only have been between 1,500 – 2,000 more than what I was originally assessed on so therefore would have had very little impact on the help I received towards my childcare.

I think I have to except that having the money now in the 2014-15 financial year means I will have to pay back the financial help that I did need at the time. What I don’t understand from your post is WHY it’s going to have an impact on next year’s (2015-16) payments. Next financial year, I’ll be back to my usual pay but with a 1,500-2,000 wage increase. I have to estimate my future earning when I renew my claim. Do they not take this into consideration?

PETIE

You said you are only receiving the childcare element? and not child tax credits?

Worrymo

PETIE wrote: »

You said you are only receiving the childcare element? and not child tax credits?

Hi
Yes. You're right. I said 'I earn too much to get much working families tax credits.' I went to dig out my paperwork to check. I consider myself to be a reasonably intelligent person but trying to understand the breakdown of both the provisional and the final decision paper work for each year flummoxes me! I do get Child Tax Credit and the Childcare element of Working Tax Credit. It's the Working Tax Credit element (other than childcare) that my wages reduce down to a few pounds.

Ah! the CTC and WTC that I've been reading in other posts is finally making sense now - scratch that reasonably intelligent remark I made before.