Benefit cuts timetable

mejaa

Does anyone know when details of cuts will all be clarified ?

andrewmp

Technical Manual here:

http://www.hmrc.gov.uk/manuals/tctmanual/tctm07appx2.htm

I'm hoping the BBC etc are right, rather than The Telegraph!

Unless things have changed, if WTC is tapered away to zero, the new WTC reduced allowance is not used at all and the CTC claim is calculated using the income threshold of £16,010 but you have to compare it to the WTC taper thing too.

AFAIK, no mention of a new CTC only income threshold has been mentioned for tax credits and in UC only the work allowance is affected.

This may create a situation whereby if you qualify for say £1 a month WTC, you get a load less CTC as a result. The BBC calculator seem to work it out this way as the amount you're worse off by peaks at around £14.5k (for a couple with kids) and then lowers for a while (as you no longer qualify for WTC).

It does seem unfair, but the alternative seems to be to just use the new WTC allowance for everything meaning people will be load worse off.

---

So presuming you only qualify for CTC as a result of WTC being taperred to zero, CTC should be calculated as follows:

Taper the third entitlement
The entitlement, in the award for the period, which appears next highest in the required taper order is the CTC individual elements entitlement.
As the WTC childcare elements have been reduced to nil, the CTC individual elements are worked out as follows
CTC individual elements have a minimum income threshold of £16,010.00. This threshold is compared with the amount used to taper the previous WTC work elements and WTC childcare elements to nil. Comparison of the two resulting tapers provides the highest figure, which is used in calculating entitlement to the individual elements of CTC.

Establish the amount used to taper the previous elements to nil. This is the WTC work elements of £1,583.56 plus the WTC childcare amount £584 (£2,167.56) then divided by the taper rate 0.41 = £5,286.731, added to the initial income threshold £2,145.87= £7,432.61 rounded up.
Establish the minimum income threshold for the entitlement period. This is the CTC minimum income threshold of £16,010.00 divided by 365 days and multiplied by the number of days in the period, 122 = £5,351.2876 and rounded up = £5,351.29.
A comparison of the two taper figures £7,432.61 and £5,351.29 is made. The highest figure of £7,432.61 is used as the income threshold.
Income of £9,191.78 is higher than the income threshold of £7,432.61 so a taper amount needs to be calculated.
The taper amount to be applied to this entitlement is £9,191.78 (income) minus £7,432.61 (income threshold) = £1,759.17
Then multiplied by 41% (taper rate) = £721.2597
The taper amount of £721.2597 is less than the entitlement maximum amount £1,839.76 so the taper amount is deducted from CTC to find the net amount due = £1,118.5003 rounded up = £1,118.51 = the CTC individual element.

Unless they're also changing something else that they haven't mentioned yet.

andrewmp

I see what you mean.

The way the BBC calculator seems to be doing it is using the WTC allowance for the whole claim if WTC is awarded and using the CTC threshold if WTC tapers to Nil.

Is this wrong?

Icequeen99

andrewmp wrote: »

Technical Manual here:

http://www.hmrc.gov.uk/manuals/tctmanual/tctm07appx2.htm

I'm hoping the BBC etc are right, rather than The Telegraph!

Unless things have changed, if WTC is tapered away to zero, the new WTC reduced allowance is not used at all and the CTC claim is calculated using the income threshold of £16,010 but you have to compare it to the WTC taper thing too.

AFAIK, no mention of a new CTC only income threshold has been mentioned for tax credits and in UC only the work allowance is affected.

This may create a situation whereby if you qualify for say £1 a month WTC, you get a load less CTC as a result. The BBC calculator seem to work it out this way as the amount you're worse off by peaks at around £14.5k (for a couple with kids) and then lowers for a while (as you no longer qualify for WTC).

It does seem unfair, but the alternative seems to be to just use the new WTC allowance for everything meaning people will be load worse off.

---

So presuming you only qualify for CTC as a result of WTC being taperred to zero, CTC should be calculated as follows:

Taper the third entitlement
The entitlement, in the award for the period, which appears next highest in the required taper order is the CTC individual elements entitlement.
As the WTC childcare elements have been reduced to nil, the CTC individual elements are worked out as follows
CTC individual elements have a minimum income threshold of £16,010.00. This threshold is compared with the amount used to taper the previous WTC work elements and WTC childcare elements to nil. Comparison of the two resulting tapers provides the highest figure, which is used in calculating entitlement to the individual elements of CTC.

Establish the amount used to taper the previous elements to nil. This is the WTC work elements of £1,583.56 plus the WTC childcare amount £584 (£2,167.56) then divided by the taper rate 0.41 = £5,286.731, added to the initial income threshold £2,145.87= £7,432.61 rounded up.
Establish the minimum income threshold for the entitlement period. This is the CTC minimum income threshold of £16,010.00 divided by 365 days and multiplied by the number of days in the period, 122 = £5,351.2876 and rounded up = £5,351.29.
A comparison of the two taper figures £7,432.61 and £5,351.29 is made. The highest figure of £7,432.61 is used as the income threshold.
Income of £9,191.78 is higher than the income threshold of £7,432.61 so a taper amount needs to be calculated.
The taper amount to be applied to this entitlement is £9,191.78 (income) minus £7,432.61 (income threshold) = £1,759.17
Then multiplied by 41% (taper rate) = £721.2597
The taper amount of £721.2597 is less than the entitlement maximum amount £1,839.76 so the taper amount is deducted from CTC to find the net amount due = £1,118.5003 rounded up = £1,118.51 = the CTC individual element.

Unless they're also changing something else that they haven't mentioned yet.

I am not sure about the bit where you say £1 of WTC leads to less CTC.

Can you give me a scenario that you are using in the BBC calculator to get results like that?

IQ

andrewmp

Icequeen99 wrote: »

I am not sure about the bit where you say £1 of WTC leads to less CTC.

Can you give me a scenario that you are using in the BBC calculator to get results like that?

IQ

Earnings Worse Off
6000 1032
7000 1274
8000 1344
9000 1414
10000 1484
11000 1474
12000 1544
13000 1614
13500 1649
14000 1592
14500 1387
15000 1182
16000 772
17000 791
18000 861
19000 931
20000 1001
21000 1071
22000 1141
23000 1211
24000 817
25000 407

As you can see it peaks at around 13,500 - I had assumed this was because of the WTC entitlement, maybe I'm wrong?

Either way, the government have to clarify. I think this is right without any change to the child tax credit threshold.

They did say they'd only change the work element in Universal Credit too didn't they? Presumably there's a child element threshold in UC too?

As the WTC childcare elements have been reduced to nil, the CTC individual elements are worked out as follows
CTC individual elements have a minimum income threshold of £16,010.00. This threshold is compared with the amount used to taper the previous WTC work elements and WTC childcare elements to nil. Comparison of the two resulting tapers provides the highest figure, which is used in calculating entitlement to the individual elements of CTC.

So based on that, if the £16,010 figure remains, the BBC is right whereby people who qualify for CTC only due to tapering of WTC would use the £16,010 figure, they've announced no change to this yet, so their calculator is right?

From what you say this will change, when will they change it though and have they considered this in the budget savings already, or are they working out the savings based on keeping the CTC figure at £16,010?

Icequeen99

andrewmp wrote: »

Earnings Worse Off
6000 1032
7000 1274
8000 1344
9000 1414
10000 1484
11000 1474
12000 1544
13000 1614
13500 1649
14000 1592
14500 1387
15000 1182
16000 772
17000 791
18000 861
19000 931
20000 1001
21000 1071
22000 1141
23000 1211
24000 817
25000 407

As you can see it peaks at around 13,500 - I had assumed this was because of the WTC entitlement, maybe I'm wrong?

Either way, the government have to clarify. I think this is right without any change to the child tax credit threshold.

They did say they'd only change the work element in Universal Credit too didn't they? Presumably there's a child element threshold in UC too?

As the WTC childcare elements have been reduced to nil, the CTC individual elements are worked out as follows
CTC individual elements have a minimum income threshold of £16,010.00. This threshold is compared with the amount used to taper the previous WTC work elements and WTC childcare elements to nil. Comparison of the two resulting tapers provides the highest figure, which is used in calculating entitlement to the individual elements of CTC.

So based on that, if the £16,010 figure remains, the BBC is right whereby people who qualify for CTC only due to tapering of WTC would use the £16,010 figure, they've announced no change to this yet, so their calculator is right?

From what you say this will change, when will they change it though and have they considered this in the budget savings already, or are they working out the savings based on keeping the CTC figure at £16,010?

And to get those figures out - did you enter a working person? How many hours did you put in? and how many children?

IQ

andrewmp

Icequeen99 wrote: »

And to get those figures out - did you enter a working person? How many hours did you put in? and how many children?

IQ

I can't remember now, but it was a working person, possibly a couple, full time, with one kid I believe, possibly two. Obviously the amounts will differ based on different amounts of kids, but the general different "worse off" figures should be similar at the lower levels.

I suspect the spike is where WTC tapers to zero and the drop past £13,5k is where the claimant moves to CTC only (calculated using the not yet reduced £16k threshold).

The calculator is right isn't it, until the announce a change to the CTC only figure?

Just checked, single person, full time work, two kids brings up the same "worse off amounts"

Icequeen99

andrewmp wrote: »

I can't remember now, but it was a working person, possibly a couple, full time, with one kid I believe, possibly two. Obviously the amounts will differ based on different amounts of kids, but the general different "worse off" figures should be similar at the lower levels.

I suspect the spike is where WTC tapers to zero and the drop past £13,5k is where the claimant moves to CTC only (calculated using the not yet reduced £16k threshold).

The calculator is right isn't it, until the announce a change to the CTC only figure?

Just checked, single person, full time work, two kids brings up the same "worse off amounts"

The CTC threshold has never been announced in the Budget - in 2011 the taper rate for WTC changed from 37% to 39% which caused the CTC threshold to fall. That was not announced, it was just a consequence of the WTC threshold changing.

I think it is a dangerous assumption to make that the CTC threshold will be calculated differently this year.

Also the figures you post are the net figures - not the tax credits figures.

So I still maintain their calculator is wrong - but we will see.

IQ

andrewmp

Icequeen99 wrote: »

The CTC threshold has never been announced in the Budget - in 2011 the taper rate for WTC changed from 37% to 39% which caused the CTC threshold to fall. That was not announced, it was just a consequence of the WTC threshold changing.

I think it is a dangerous assumption to make that the CTC threshold will be calculated differently this year.

Also the figures you post are the net figures - not the tax credits figures.

So I still maintain their calculator is wrong - but we will see.

IQ

What will the new CTC only threshold be based on the new taper and the new WTC allowance?

Icequeen99

andrewmp wrote: »

What will the new CTC only threshold be based on the new taper and the new WTC allowance?

12125

The other thing about the BBC calculator it ignores what the legislation says in WTC/CTC cases.

You don't always use £16105 - you use that or IF GREATER the point at which WTC tapers to nil.

Take a couple, one working full time and qualifying for the disability element. Their CTC taper point from April 16 will be nearly 20k. So if their income was say 18,000 they would still get maximum CTC even if HMRC left the threshold at £16,105.

IQ