Tax Credits

setmefree2

Does anyone know what type of people, in general, receive tax credits and will be effected by the cuts? Is it mostly women working in shops while their kids are at school? Dinner ladies, Cleaners? Has anybody seen any good articles about this?

Thanks.

EDIT 14/10/2015

Do posters think that tax credits are a good use of tax payers money??? Or a waste of money because they are a subsidy to business to the tune of £30 billion which ends up as dividend payments?

michaels

I had to rejig my income this year to below the new lower first withdrawal threshold to make sure I was not hit by the changes next year. Household 1 earner 37.5 hours/week, SAHW and 3 kids 11, 9, 6

I have to say lowering the withdrawal threshold makes sense, increasing the withdrawal rate makes it even less likely that work will pay and seems to be the opposite of govt ploicy that work should always make sense. After all if you earn over 150k apparently a marginal rate above 47% will deter you from working whereas on 8k it is assumed that 80% marginal tax rate (or above if you get housing and council tax benefit) is completely fine....

I'm looking at droping my hours below 24 next tax year, I lose 4k in wtc but gain free school meals, free music lessons etc which I think then gives the school a big pupil prremia boost - possibly for up to 5 years?

zagfles

setmefree2 wrote: »

Does anyone know what type of people, in general, receive tax credits and will be effected by the cuts? Is it mostly women working in shops while their kids are at school? Dinner ladies, Cleaners? Has anybody seen any good articles about this?

Thanks.

Mostly low-average income people with kids, but also some low income people without kids, and higher income people with large families or higher childcare costs. It's assessed jointly for couples so just because someone's on a low income and has kids doesn't mean they'd get any - their partner could be on a high income.

setmefree2

Do posters think that tax credits are a good use of tax payers money??? Or a waste of money because they are a subsidy to business to the tune of £30 billion which ends up as dividend payments?

zagfles

michaels wrote: »

I had to rejig my income this year to below the new lower first withdrawal threshold to make sure I was not hit by the changes next year. Household 1 earner 37.5 hours/week, SAHW and 3 kids 11, 9, 6

I have to say lowering the withdrawal threshold makes sense, increasing the withdrawal rate makes it even less likely that work will pay and seems to be the opposite of govt ploicy that work should always make sense. After all if you earn over 150k apparently a marginal rate above 47% will deter you from working whereas on 8k it is assumed that 80% marginal tax rate (or above if you get housing and council tax benefit) is completely fine....

I'm looking at droping my hours below 24 next tax year, I lose 4k in wtc but gain free school meals, free music lessons etc which I think then gives the school a big pupil prremia boost - possibly for up to 5 years?

Just bear in mind if you're using pension contributions to lower your income - it's looking likely that the govt will move to flat rate relief on pension contributions following the recent consultation. This could easily spell the end of pension conts being deductible for tax credits and they could no longer be deductible for tax as now - it's likely to require a move to a system where pension conts are taken from after tax pay and the govt provide the flat-rate relief direct, and possibly employer conts becoming a taxable benefit offset by the flat-rate relief.

chucknorris

zagfles wrote: »

Just bear in mind if you're using pension contributions to lower your income - it's looking likely that the govt will move to flat rate relief on pension contributions following the recent consultation. This could easily spell the end of pension conts being deductible for tax credits and they could no longer be deductible for tax as now - it's likely to require a move to a system where pension conts are taken from after tax pay and the govt provide the flat-rate relief direct, and possibly employer conts becoming a taxable benefit offset by the flat-rate relief.

Is that really likely to happen? I haven't really got a stake, but one of the slightly disappointing things of taking early retirement next summer was the loss of annually investing £40k into my SIPP. It will at least soften that blow for me.

michaels

zagfles wrote: »

Just bear in mind if you're using pension contributions to lower your income - it's looking likely that the govt will move to flat rate relief on pension contributions following the recent consultation. This could easily spell the end of pension conts being deductible for tax credits and they could no longer be deductible for tax as now - it's likely to require a move to a system where pension conts are taken from after tax pay and the govt provide the flat-rate relief direct, and possibly employer conts becoming a taxable benefit offset by the flat-rate relief.

All the more reason for me to top up my pension in a single 60k 'hit' this year and probably next than to spin it out at 12k a year for the next 10

Working Tax Credit and Pupil Premia. I wonder how this works.

Children eligible for free school meals get the pupil premium for 6 years after they were last eligible.

You get free school meals if you get full child tax credits but no working tax credits.

I wonder if I could reduce my hours to 23.5 for the last month of this tax year which removes my eligibility for wtc and thus in theory qualifies my kids for free school meals.

Then restore hours for next year, lose the free school meals, get the wtc back and benefit the kids schools with 900pa per kid for the next 6 years (16.2k). Cost to me 8 days unpaid in March and loss of 350 quid of wtc. Then each time the PTA approached me to run a stall at the school fayre I could refuse, comfortable in the knowledge I had contributed much more to school funds than any of the do-gooders.

Mistermeaner

These particular cuts are in the 'potentially unpopular amongst people who support us' bracket for the tories (working benefits) - hence getting them done early in the term.

Expect more cuts to follow for those who are not in the 'potentially support us bracket' later in the term; i.e. hefty reductions in non-working benefits

zagfles

chucknorris wrote: »

Is that really likely to happen? I haven't really got a stake, but one of the slightly disappointing things of taking early retirement next summer was the loss of annually investing £40k into my SIPP. It will at least soften that blow for me.

Flat-rate relief is likely to happen, it looks like the bookies favourite as the outcome of the consultation. I think the govt would really like to move to a pension style ISA (PISA) but moving existing plans to a PISA would be a nightmare. They could offer it as an option running alongside existing plans.

michaels

chucknorris wrote: »

Is that really likely to happen? I haven't really got a stake, but one of the slightly disappointing things of taking early retirement next summer was the loss of annually investing £40k into my SIPP. It will at least soften that blow for me.

Whilst in theory the govt would like us all to provide for our retirements to save on benefits to pensioners their actual fiscal timeframe is 'how long is it till the next election' so there are big fiscal advantages to giving less tax releif on pensions now (perhaps in return for promising less tax on pension earnings when they are received) - hence 'pension ISAs'. All that lovely tax income now from taxing money that would have gone tax free into a pension at the expense of less tax in the future when people take tax free income from thir isas rather than taxable income from their pensions.

Plus of course the possible side benefit that if people get the money now and then have to consciously put it into their pension isa there is the temptation to spend it instead on economy boosting vatable consumption.

zagfles

michaels wrote: »

All the more reason for me to top up my pension in a single 60k 'hit' this year and probably next than to spin it out at 12k a year for the next 10

Yes assuming you've got enough AA to carry forwards! And relevant earnings this year of at least £60k

Working Tax Credit and Pupil Premia. I wonder how this works.

Children eligible for free school meals get the pupil premium for 6 years after they were last eligible.

You get free school meals if you get full child tax credits but no working tax credits.

I wonder if I could reduce my hours to 23.5 for the last month of this tax year which removes my eligibility for wtc and thus in theory qualifies my kids for free school meals.

Possibly but I'm not sure of the exact rules surrounding pupil premium & FSM.