tax credits: relevant periods

chloenightingale

I have just added a new baby to our existing tax credits claim (this may be relevant in that I think it may start a new "relevant period"). We were already in receipt of child tax credit.

In a month or so my husband is starting full time work (having not worked thus far in the tax year). Income in this tax year to date is less than £1000, but he might earn up to £10000 on top of that before the tax year ends.

1) For the purpose of calculating our final tax credit award at year end is it the case that:

a) entitlements for the periods before and after the birth differ because of the additional child element but the amount of tax credit in each period is calculatied based on total annual income (up to £11k).

or b) that his earned income is all applied on a pro-rated basis to the second period (e.g. over a 5.5 month period income was £10k so over that period annual income for tax credits purposes is treated as being £10k *12/5.5 = £21.8k).

or c) similar to b) but with three periods, one before the birth, one between the birth and when he starts work and one after he starts work?

2) Is it possible that we qualify for working tax credit (in addition to child tax credit) for the part of this year in which my husband is working but then not in future years if he earns at the same rate over a full subsequent tax year?

Any advice would be much appreciated.

Darksparkle

The elements e.g. Child element have relevant periods.

The elements are added up to give a total entitlement for the tax year.

This amount is then reduced based on income.

The income used in this calculation is for the full tax year. So if you are in a job for 6months with a £10,000 salary (£5,000) and the remaining 6months with a £20,000 salary (£10,000) then the income for the tax year is £15,000.

It also considers last year's income and how this compares to this year (as there is a £2500 diresgard).

chloenightingale

So it makes no difference at all how the income is distributed across the year as far as child tax credit is concerned, i.e. as long as our total income for the year is under the £16105 threshold this year our tax credits for this year would be unaffected by the additional earned income?

Darksparkle

chloenightingale wrote: »

So it makes no difference at all how the income is distributed across the year as far as child tax credit is concerned, i.e. as long as our total income for the year is under the £16105 threshold this year our tax credits for this year would be unaffected by the additional earned income?

It's hard to comment without knowing the full facts. As mentioned, it also depends on last year's income.

Do neither of you work or expect to work in this tax year? You mention earnings.

If not do you receive any income based benefits? If on income based benefits (e.g. IS, income based JSA/ESA) then you automatically get the maximum tax credits.

The threshold you mention is for CTC only claims. The threshold is lower for WTC & CTC claims.

xylophone

Do neither of you work or expect to work in this tax year?

OP says above

In a month or so my husband is starting full time work (having not worked thus far in the tax year). Income in this tax year to date is less than £1000, but he might earn up to £10000 on top of that before the tax year ends.

Darksparkle

xylophone wrote: »

OP says above

OP hasn't mentioned if she works though plus where the £1000 comes from if he hasn't worked.

chloenightingale

Sorry for the lengthy delay in responding.

£1000 is interest plus small amount of self-employed income for me (I only average about one hour per week). Previous tax year income is something similar (so we qualified for max child tax credit).

chloenightingale

We are not on any income based benefits.

I assume we will qualify for working tax credit for the period from when my husband starts work until the end of the year since it seems to be based on our total income (will be around £11k) in this tax year and him doing enough hours (on a weekly basis) to qualify.

Then we would be kicked off it given his annual earnings for the next tax year would be too high to qualify for WTC, i.e. we basically get a windfall because he satrts work in the second half of the tax year.

Does that sound plausible?