Confused tax credits & nursery fees - Help pls

jjmum

Would really appreciate some advice please. First post so please take it easy on me!

I am just returning to work from maternity leave & have rang the Inland Revenue to update my salary & nursery fees info. Surprisingly, they have awarded me the childcare element of Child Tax Credit towards my nursery fees which I don't understand as I would have thought we earned too much. I have checked but they insist they are right. However, I have checked on several internet websites & everywhere else says I should not be entitled to them. I do not want to owe them money next year!:eek:

Income was lower than usual last year due to mat leave but here goes the info I have given them:

My salary for 06/07 £25k, my partner's £10500. We both work 30 hours per week.

Two children aged 1 & 4, both with some childcare costs averaging £71 per week.

Awarded £3696.60 for child elements of Child Tax Credit + £545 basic & £123.67 remaining for baby's 1st year additional payment. This is then reduced by £2680.19 due to our income leaving a net payment for the year of £1685.42 when I was only expecting £545 + £123.

No matter what I read & calculate I just can't see how we've got this amount!

Any help available? Greatly appreciated.

PS If they are correct, I now need to drive myself daft over whether its worth us having the childcare vouchers from work we've signed up to! Aaaaagggghhhh!

System

When you apply for Tax Credits the TCO use your circumstances to determine what elements of WTC and CTC you are entitled to. So you and your husband would be entiteld to the following elements:-

WTC - Basic, 2nd Adult, 30 hour and childcare
CTC - Child(2), baby and Family

All these elements are totalled and then they use your joint income to determine how much of that total you are going to get. Your award notice will therefore include/list all the elements used in the make up of your award.

If you think of the elements as a tower with the WTC elements piled one on top of each other and then the CTC elements on top with the Family element at the very top then your income is used to chip away those elements from the bottom up with the Family element the very last to go. This is usually at an income of about £60000.

If you think your income is going to be considerably higher than last year then you need to tell them though your award notice should have told you the specific income threshold above which you need to contact them.

diddlydum

It's your previous year's income that is used to determine it, if your current year's income is higher. Be careful if you expect your income to be significantly higher this year, but for most people its about £25,000 difference before it gets taken into account.

A good idea would be to keep a record of when you rang them, and who you spoke to, and keep this in a very safe place. If there is an overpayment because of this, you can challenge the recovery based on official error.

jjmum

Thank you for your help.

What I have noticed whilst reading the small print for the 100th time is that they have rounded up my nursery fees for a full year costs backdated to 6/4/07 even though they are aware that my youngest started on 21/8/07 (& their records are confirmed as such). This makes my fees higher than actually are. When corrected, I no longer qualify as I thought in the first place!

Don't know if I think this is good news or bad news but at least I'm not going to owe anything next year!!!:rotfl: