Strange scenario with evidencing tax credits

keira1234

As IQ says, income changes are different to others. Your tax credits are a yearly award based on your total inc for 15-16 tax year (the fig that will be on your p60) if at ANY point in the year you know this will go up or down you tell them.

All you need to say on the phone is 'my total inc for the year will be x, please update my record'

keira1234

Even if you over estimated it wouldn't matter, you give them your final figure at the end of the tax year once you have your p60 and then the award is finalised.

roje

Thanks Keira. So I can just tell them whatever I like really as they will just readjust it next April? So if I overestimated to make my tax year income the same as my new salary, I'd just get the surplus owed to me back at the end of the tax year?

keira1234

They always advise to overestimate rather than underestimate anyway. Yes any surplus would be paid back when finalised next year.

roje

That is really helpful, thanks. I'm going to ring them tomorrow and insist they alter it now.

Icequeen99

roje wrote: »

Thanks Keira. So I can just tell them whatever I like really as they will just readjust it next April? So if I overestimated to make my tax year income the same as my new salary, I'd just get the surplus owed to me back at the end of the tax year?

Keira is right. As I said above, don't tell them about the job just say you want to give an estimated 15/16 income.

However, i hope you are taking into account the income disregards when working out what your new payments will be. If your income i going up, the first £5000 will not affect your award this year, but it will next year.

The figures you ran through the calculator may be right if it was one year to the next, but it wouldn't factor in loss of the disregard for the following year which may lead you to believe you are getting more tax credits that you will actually get.

IQ

roje

As expected, they have requested more info.
I have contacted tax credits to amend my award for the income I will have received between April 15-April 16 and am waiting on the revised award.

However, the wording of the request for further information states that they want "Proof of tax credits income - a revised tax credit award letter showing reduced income as salary is increasing."

Does this mean that they need to see what I will receive with an income that directly matches my new salary? As this information will not be available until April 2016! They base tax credits on the income from the previous tax year and I am still working in my part time job until 31st August so my income will be £5k lower than the salary used for the mortgage app (which starts on 1st Sept).

Or are they likely to accept the award for my actual income until April 2016? I don't really know what to do if they insist on me providing evidence of what my payments will be AFTER April 2016 as I don't have that, and tax credits won't provide it until then.

roje

Icequeen99 wrote: »

Keira is right. As I said above, don't tell them about the job just say you want to give an estimated 15/16 income.

However, i hope you are taking into account the income disregards when working out what your new payments will be. If your income i going up, the first £5000 will not affect your award this year, but it will next year.

The figures you ran through the calculator may be right if it was one year to the next, but it wouldn't factor in loss of the disregard for the following year which may lead you to believe you are getting more tax credits that you will actually get.

IQ

Hi, could you possibly explain this a bit more? My income for the year is going to be around £5k more than I expected it to be due to a new job. Does this mean that my actual payments won't go down this year but they will then take back an overpayment next year? What income will show on my award notice, the actual income?

Icequeen99

roje wrote: »

Hi, could you possibly explain this a bit more? My income for the year is going to be around £5k more than I expected it to be due to a new job. Does this mean that my actual payments won't go down this year but they will then take back an overpayment next year? What income will show on my award notice, the actual income?

Ok, so your 15/16 income is going to be 5k higher than 14/15. Your 15/16 award will still be based on 14/15 income, because the rise is only 5k. There will be no overpayment.

From April 16, your payments will reduce and be based on the actual 15/16 salary. (unless your 16/17 salary will be more than 5k higher than 15/16)

However, as you are only working your new job for part of the year, you still won't be at your 'highest' annual income - so it will not be until April 17 that your tax credits award truly reflects your new salary.

Hopefully I have understood your situation correctly.

IQ

roje

Yes you have, thanks for that.

Current income being used for tax credit purposes: £18,745 (I only work 3 days until Sept).
Actual income from Sept 1st: £30,200.
Mortgage based on £30,200 plus the amount of tax credits the online calculator says I will receive for an income of £30, 200 ( I have used the calculator incorrectly on purpose to cancel out any confusion, rather than putting my 'real' income for this tax year as I wanted to find out how much I'd receive on my salary only from April 2017).

What is troubling me is that my revised award for this tax year will actually show an income of £25,425 (I know that £5k of this is disregarded so I will receive more until April than I normally will in future). I'm worried that having this new 'earnings' figure on the award notice is just going to confuse the lender further.

My only other option is to ring tax credits again and (incorrectly) report my income for this tax year as £30,200 so that my new income shows on my award notice (simply for the sake of the mortgage). However, I will lose money, and even worse, they could decide that I might go over the threshold for tax credits if I'll be earning that much more in 7 months?

No idea what to do. There are delays involved here too, it takes two weeks each time for a revised award.