HMRC Tax Rebate on Universal Credit

mineral68

calcotti, I'm not sure how you can get a monthly income tax refund if you've not actually overpaid income tax?

pmduk

PAYE works on the basis that you will be paid similar amounts each month, splitting your annual tax allowance accordingly. If your income dips, eg through sickness, you will have paid too much tax so far for that year and should receive a refund.

mineral68

Yes I follow pmduk.
There is also the issue of the DWP, through snatching tax refunds via UC, actually conflicting with NMW legislation. Everyone is entitled to the NMW, but by the DWP denying workers a tax refund for overpaid income whilst working on the NMW they are breaching the NMW legislation, or at least denying people the NMW. I intend to raise this issue with my MP in the New Year. He is a Labour MP so he might be interested.

calcotti

pmduk wrote: »

PAYE works on the basis that you will be paid similar amounts each month, splitting your annual tax allowance accordingly. If your income dips, eg through sickness, you will have paid too much tax so far for that year and should receive a refund.

63% of which is then deducted from your UC entitlement so that effectively you don’t get that proportion of the refund.

JCS1

mineral68 wrote: »

Yes I follow pmduk.
There is also the issue of the DWP, through snatching tax refunds via UC, actually conflicting with NMW legislation. Everyone is entitled to the NMW, but by the DWP denying workers a tax refund for overpaid income whilst working on the NMW they are breaching the NMW legislation, or at least denying people the NMW. I intend to raise this issue with my MP in the New Year. He is a Labour MP so he might be interested.

But NMW is paid gross, the tax and NI are covered in other legislation.

mineral68

JCS1, I don't follow. The NMW is paid gross, but if the DWP is effectively taking more tax from a worker through UC by removing some of your tax free allowance it still means that it does not pay to work in a system that actively penalises those in low paid insecure (temporary) employment.

JCS1

A person could have a second job paying NMW, and with having a first job with all their tax allowances, pay 40% tax on the NMW on the second job (Assuming their first job was well paid).

Tax and NI applies to all employment, not just NMW jobs.

mineral68

Tax and NI does apply to most jobs (not low paid part-time only jobs), but the point I was making was about how UC taking tax refunds off workers may bring people below the legal NMW - meaning that the DWP are denying people the NMW.

JCS1

mineral68 wrote: »

Tax and NI does apply to most jobs (not low paid part-time only jobs), but the point I was making was about how UC taking tax refunds off workers may bring people below the legal NMW - meaning that the DWP are denying people the NMW.

But it's tax which is doing that, not the NMW.

calcotti

JCS1 wrote: »

But it's tax which is doing that, not the NMW.

But if the tax is overpaid in normal circumstances it is refunded and therefor3no tax is paid. In the case of someone gett8ng therefund while on UC they lose 63% of the refund and are therefore penalised by UC.it is UC that is the problem not tax - HMRC have returned the money.