Moving from benefits to tax credits

tink273

Hi all can you please help me regarding tax credits
The calculations are driving me crazy

OH has just started self employment and were now pretty confident he can secure 30 hrs a week (still not happy about it but needs must hey)

so were looking to put in for WTC but using the calculator they base it on the prev years income and it only gives you the ability to put in taxable benefits so I can only enter the CB based element of my ESA and his CA but our predicted income for this year is significantly higher than that so if they award it on that basis we’ll have a walloping over over-payment to pay back at the end of the year.
Yes we can pre-empt the over-payments as much as we can figure out and can set the money aside to pay back but that just seems Ludicrous.

So can anyone explain how it works after claiming IB benefits
We were on
ESA SG CB with IR top up (he was on my claim)
CA
CTB
SMI
DLA –HRM & HRC

We will be on
ESA SG CB
PIP – LRMC HRDLC
His earnings of roughly £200 pw ( I know this is slightly below NLW but for first year trading I think its pretty good to get a £10,000 PA profit)

Wow that’s a lot of acronyms sorry about that,
so can anyone help me work out what we may be able to claim or just how it works it would be very much appreciated

Thanks
Tink

Darksparkle

The calculator tells you what to do if this year's income will be different before you start - https://www.gov.uk/tax-credits-calculator#before-you-start

your income is likely to be different from last year

The calculator asks you for your income for the last tax year. If you think your income will change by more than £2,500 this tax year, estimate what your income will be and:

- take away £2,500 from it if it’s going up
- add £2,500 to it if it’s going down

You’ll need to use this figure instead of your actual income. This is because the Tax Credit Office ignores the first £2,500 of your income change, but the calculator doesn’t.

Example
Your income for the last tax year was £30,000. You think your income will drop to £20,000 this tax year. Enter £22,500 into the calculator.

The calculator only gives you the ability to include income from taxable benefits because it's only taxable benefits that are included as income. So you need to include your contributions based ESA (you haven't said how much this is so I cannot do any calculations).

tink273

Hiya,

Thank you very much for the reply there's a lot of useful info there
Sorry I forgot to say my esa will be £109 pw

Can I ask another question please at the end of the year if by chance you earn more than estimated (not much though) do they
A. claim an overpayment back
B. Deduct an overpayment from next years award
C. Just use the actual figures to calculate the following years award

Thank you
Tink

Darksparkle

There isn't really a straightforward answer to that, it depends on the specifics of the claim, the previous year's income, the estimate you provided for the current year and the final figure.

Tax credits is based on the previous year's income unless the current year income increases/decreases by £2,500

If there is an overpayment in one year, it will be recovered from the following year (if still eligible) at a set percentage depending on your circumstances.

If you stop being eligible and there is an overpayment outstanding, you'll be asked to repay it directly.

It is advised that you overestimate your income rather than underestimate to avoid overpayments.

The claim form only asks for last year's income. If this year's income will be different then you need to call them and tell them once you receive your first awards notice.