Entitlement to Working Tax Credit question.

Erik2012

A disabled friend, who was self employed, has been entitled to WTC for a number of years. She started a new job as an employee today and informed WTC of this. She will now be earning more than the limit for claiming WTC and has also informed them of this fact. What she is worried about is because she will now go over the limit for the rest of this tax year will they claim back the entitlement she has already been paid from April to July? Or because she was entitled to the payment during those months will she allowed to keep it?

Darksparkle

It will depend on what she earned last tax year and what she expects to earn in this tax year.

Erik2012

Last year she earned under 6000. She earned £104 per week part time until the new full time job started and will now earn over £500 a week for the rest of the tax year. She reported the change of income on the day it happened (the new job started) She expects the working tax credits to stop immediately, but what happens to the working tax credits already received since the beginning of the tax year?

Darksparkle

Sorry, if you can't give the figure for the tax year, I can't explain it in greater detail. What figure has she told tax credits she expects to earn this year?

The first £2500 of the increase will be disregarded.

The new figure will then be used to calculate what she is entitled to for the full tax year. So that will include what she has already been paid.

If she is disabled she might not be over the limit this tax year but will depend on the level of disability (if she receives just the disability element or also the severe disability element), working hours before and after, single/couple, children etc.

Erik2012

Total earnings this tax year = 37000 (which is what she has told tax credits) and includes all the £104s earned so far up to the date she started her new job and the carers allowance (which will obviously stop now)

Darksparkle

Is she sure that's right? £500 per week for a full year would only be £26,000

Erik2012

I said over £500 per week, she isn't prepared to give me every single detail to pass onto a public forum, I was simply trying to find out if working tax credits consider an overpayment to be after the work start date when they are not told, or they go back to the start of the year. Let me give you an example instead of exactness:

X works part time from April to November and gets WTC. They start a job as CEO of ICI on 1st November (earning £100,000 between 1st November and 4th April the next year.) They tell WTC immediately the job starts. Will WTC want any of the money back that they have paid between 5th April and 1st November?

densol_2

Yes they want it back.

The WHOLE tax year is assessed - so earning big bucks half the year can make the whole year outside the limits.

On a more modest salary - if its just 6 months at higher and 6 months at lower -they might get some but unlikely on the figures you mention as WTC on its own has a low threshold

Darksparkle

Erik2012 wrote: »

I said over £500 per week, she isn't prepared to give me every single detail to pass onto a public forum, I was simply trying to find out if working tax credits consider an overpayment to be after the work start date when they are not told, or they go back to the start of the year. Let me give you an example instead of exactness:

X works part time from April to November and gets WTC. They start a job as CEO of ICI on 1st November (earning £100,000 between 1st November and 4th April the next year.) They tell WTC immediately the job starts. Will WTC want any of the money back that they have paid between 5th April and 1st November?

Well I did already answer that in an earlier post.

Apologies for trying to help further! She could have just asked tax credits this when she called them if unwilling to be specific on a public forum where no one knows who she is anyway!

dktreesea

Yes, they will want it all back. But they won't do anything about it until they have her total income for the current tax year. She should make sure they stop her WTC from now on though, to limit the overpayment.


I have had this particular experience. Eventually I got a letter from the debt management office, and note the "eventually", as that particular year I stopped the tax credits in August, when it became obvious our income would be over both the disregard and the amount for tax credits, and the letter came a couple of months after I filed the tax return, so November of the following year. I had tax to pay which was due by the following January. As I recall they just tacked the amount to be repaid onto that tax.


Tell your friend not to panic. Three months of tax credits to repay, even with the disability element added on, probably will still be shy of £1,000. It may also be different for PAYE people. HMRC may be able to claw it back by adjusting your friend's income tax.


The MOST important thing is for your friend to let them know her change in circumstances straight away so they can stop the payments going forward.