MSE News: Summer Budget 2015: Millions to face benefit cuts

Becles

Trying to get my head around figures. I'm a normal rate tax payer so will have to pay tax and NI on additional earnings and I'm aware of the taper on tax credits if your salary goes up.

What I'm trying to work out is, how much extra money do I have to earn to end up with an additional £1700 overall in my hand!

mejaa

Becles wrote: »

Trying to get my head around figures. I'm a normal rate tax payer so will have to pay tax and NI on additional earnings and I'm aware of the taper on tax credits if your salary goe
What I'm trying to work out is, how much extra money do I have to earn to end up with an additional £1700 overall in my hand![/Q


Well for every £1000 you make, assuming you still get tax credits, £480 will get reduced off tax credits, £200 income tax then £120 so will leave you £200 per every £1000mif you claim tax credits.
Hope that makes sense.

Bella56

zagfles wrote: »

No, you're not usually worse off overall by earning more. There are some circumstances in tax credits where you can be worse off earning more but it's not the norm.

What calculator are you using?

Thanks. I'm using the BBC's and the Guardian's, both are giving about the same answer. So although the tax credits will be £200 worse if I, say, double self-emp. hours/pay (and £1400 worse than this year), that just means I'll have less TC than this year but more money overall? I just find the wording really confusing, the "worse off" bit - I took that too literally I guess

SkyeKnight

Becles wrote: »

Trying to get my head around figures. I'm a normal rate tax payer so will have to pay tax and NI on additional earnings and I'm aware of the taper on tax credits if your salary goes up.

What I'm trying to work out is, how much extra money do I have to earn to end up with an additional £1700 overall in my hand!

£8,500.

Isn't Mr Osbourne right - we all just need to that work that little bit harder to be better off... err...

Becles

SkyeKnight wrote: »

£8,500.

Isn't Mr Osbourne right - we all just need to that work that little bit harder to be better off... err...

That's roughly what I worked out but I thought it looked wrong!

So if you divide that by 50 weeks, I need to work another 24 hours a week at minimum wage to make up my losses.

I already work 35-40 hours a week and I'm a single Mam of three with a long term chronic health condition. So yeah it'll be easy slotting those extra 24 hours work in :rotfl:

mejaa

Becles wrote: »

That's roughly what I worked out but I thought it looked wrong!

So if you divide that by 50 weeks, I need to work another 24 hours a week at minimum wage to make up my losses.

I already work 35-40 hours a week and I'm a single Mam of three with a long term chronic health condition. So yeah it'll be easy slotting those extra 24 hours work in :rotfl:

All the wrong people are being affected

zagfles

Bella56 wrote: »

Thanks. I'm using the BBC's and the Guardian's, both are giving about the same answer.

Both wrong! Try the Telegraph:
http://www.telegraph.co.uk/finance/budget/11726113/Budget-calculator-work-out-how-your-finances-have-changed.html

This should give the right answer provided you claim WTC. It gives the wrong answer for CTC only claims.

So although the tax credits will be £200 worse if I, say, double self-emp. hours/pay (and £1400 worse than this year), that just means I'll have less TC than this year but more money overall? I just find the wording really confusing, the "worse off" bit - I took that too literally I guess

They use the same salary this year and next year and see what the change is in tax credits, tax etc.

zagfles

Becles wrote: »

Trying to get my head around figures. I'm a normal rate tax payer so will have to pay tax and NI on additional earnings and I'm aware of the taper on tax credits if your salary goes up.

What I'm trying to work out is, how much extra money do I have to earn to end up with an additional £1700 overall in my hand!

If you've got a 13 year old in school give this to them to practice their algebra:

Find x where:

x - 0.2x - 0.12x - 0.48(x-2500) = 1700

Scroll down for answer....











(1 - 0.2 - 0.12 - 0.48)x + 2500*0.48 = 1700

x = (1700 - 1200) / 0.2

x = 2500

x is the extra you need to earn, £2500.

Then when your child moans "what's the point of algebra, when am I ever going to use it", you've got an answer

This is only for the first year, due to the disregard in tax credits for income increases.

(BTW if x turned out to be less than £2500 the equation would be wrong, but don't confuse your kid with this!)

zagfles

SkyeKnight wrote: »

£8,500.

Isn't Mr Osbourne right - we all just need to that work that little bit harder to be better off... err...

Right long term, but in the first year it's only £2500 due to income increase disregard.

£2500 extra will not reduce tax credits in the first year, £500 tax plus £300 NI extra, gives £1700 net!

The following year, same gross would give £1200 less as tax credits would be based on previous year. To make up that £1200, income would need to increase £1765.

The next year, tax credits will drop £847, so to make that up, need an increase of £1246.

And so on. So £8500 is right long term, but that increase can come over a number of years.

SkyeKnight

zagfles wrote: »

Right long term, but in the first year it's only £2500 due to income increase disregard.

£2500 extra will not reduce tax credits in the first year, £500 tax plus £300 NI extra, gives £1700 net!

The following year, same gross would give £1200 less as tax credits would be based on previous year. To make up that £1200, income would need to increase £1765.

The next year, tax credits will drop £847, so to make that up, need an increase of £1246.

And so on. So £8500 is right long term, but that increase can come over a number of years.

Good point - and that does make it quite a bit better.