Tax Credits

catwoman73

Example a person with 2kids earning 10k per annum working 16 hrs a week will receive an equivalent of 39k annual salary (approx 33k after tax) . They keep all 10k they earn, get approx 21k of tax free cash and 2k in child benefit. They are also elligible for housing benefit to live rent free and would get prioritised for council housing along with all the other jazz.

That's incorrect.

If they had 4 or 5 children though, it wouldn't be far from the truth. I have relatives with 5 children. One parent works 16 hours and the other is self employed so works 8 hours - this is deliberately to maximise their tax credit entitlement.

They own their house outright and have no disabilities or childcare costs and receive over £20k pa in a combination of CTC, WTC, CB and council tax benefit - if they rented, they would probably be entitled to HB too. Add on the approx £8/10k they earn from working and they have a total income of close to £30k or £2.5k per month, which is equivalent to a £40k+ pa salary.

I know this because another relative often complains that she has a similar money coming in than the first family, despite them working much longer hours and the husband has a professional job, degree and further qualifications, although it is in an industry that doesn't pay big 'city' money.

The husband earns about £35k from the kind of job that requires over 40 hours a week and nationwide travel, so much less free time and impacts on home life. He also has to pay his student loans. The wife works part time in a low paid job and they also need wrap around childcare. They are entitled to nothing except child benefit for their 3 children.

I agree that tax credits should be limited to no more than 2 or maybe 3 children and the system should be that people who work full time in professional jobs should see some reward for their efforts, because currently it is often the case that they are hardly any better off than if they worked part time in the shop around the corner and had their income topped up by tax credits.

zagfles

Mistermeaner wrote: »

Fag packet maths; please check my understanding and calcs....

Example a person with 2kids earning 10k per annum working 16 hrs a week will receive an equivalent of 39k annual salary (approx 33k after tax) . They keep all 10k they earn, get approx 21k of tax free cash and 2k in child benefit. They are also elligible for housing benefit to live rent free and would get prioritised for council housing along with all the other jazz.

They would only get £20k or so in tax credits if they're paying max childcare costs ie about £300pw, £15600 per year.

Tax credits counts as income for housing benefit/LHA so they wouldn't get max HB/LHA, it would be tapered.

Mistermeaner

Ok assuming no child care how much would they get? Im trying to work out the equivalent salary that would be required to get the same nett

michaels

Do you get back 100% of childcare costs, for some reason I thought you only got 70% so suggesting that people working part time make a huge income when that income consists of 'childcare' money that they don't actually see any of is a bit disnegenuous. That said doesn't mean that the comparisons between working full time and working just enough to maximise benefit entitlement are not valid.

michaels

catwoman73 wrote: »

If they had 4 or 5 children though, it wouldn't be far from the truth. I have relatives with 5 children. One parent works 16 hours and the other is self employed so works 8 hours - this is deliberately to maximise their tax credit entitlement.

They own their house outright and have no disabilities or childcare costs and receive over £20k pa in a combination of CTC, WTC, CB and council tax benefit - if they rented, they would probably be entitled to HB too. Add on the approx £8/10k they earn from working and they have a total income of close to £30k or £2.5k per month, which is equivalent to a £40k+ pa salary.

I need to look into this. One problem seems to be that if you qualify for wtc then you don't get free school meals, it is an either or - unless perhaps you can get another 'gateway' benefit - does council tax benefit count? WE would obviously need to make sure we had no savings but these can be parked into the pension and of course non-taxed income (say rent a room, solar PV FIT) etc does not count for benefits calculation purposes.

Definitely needs some serious thought, use savings to pay off mortgage/put into pension - work 3 days a week, 24 hours, salary sacrifice/avc to pension to look after income - 12k tax credits, 2.4k (3 kids) CB, 1.8k Council Tax Benefit and if we could get it 1.2k free school meals. Plus hopefully another few hundred of free school music lessons, free school trips etc. What's not to like?

zagfles

Mistermeaner wrote: »

Ok assuming no child care how much would they get? Im trying to work out the equivalent salary that would be required to get the same nett

With 2 kids on £10k, 30+ hours, about £9400.

Mistermeaner

zagfles wrote: »

With 2 kids on £10k, 30+ hours, about £9400.

So add 3k to the tax credit bit to adjust for tax etc not paid; equivalent salary would be approx 22k

It's a darn complicated system

Mistermeaner

Also why on earth w would someone working 16hrs a week need 300quid a WEEK of child care?

zagfles

michaels wrote: »

Do you get back 100% of childcare costs, for some reason I thought you only got 70% so suggesting that people working part time make a huge income when that income consists of 'childcare' money that they don't actually see any of is a bit disnegenuous. That said doesn't mean that the comparisons between working full time and working just enough to maximise benefit entitlement are not valid.

It's 70%. The issue as I see it isn't so much the net income the family get but the level of subsidy the govt gives. I can see the point in subsidising childcare, but not if childcare costs much more than the parent's earnings!

zagfles

Mistermeaner wrote: »

Also why on earth w would someone working 16hrs a week need 300quid a WEEK of child care?

They wouldn't but it was one of the examples in the table posted earlier.