Tax refund and universal credit

Dazed_and_confused

Is this refund as a result of completing your 2017:18 Self Assessment return?

Mejustme

Hi there
I’ve received a cheque for income tax overpaid by me in the financial yr 2017/18.

I registered for UC in May 18 but my self employment started in January 18.

Will the tax refund be taken as earnings by UC in January 19 ?

As I see it, it’s nor earnings. It’s a repayment of money’s ive already paid ...

Help !!

Mejustme

Not a tax return, an overpayment

calcotti

It will be treated as earned income and 63% will be deducted from your UC award for the month.

Mejustme

That’s ridiculous!
It’s not earned money. If that’s true, the system is wrong. I paid too much income tax, a refund is only due on the basis that it was overpaid in the first place.

Can’t be right.

Dazed_and_confused

But because of the tax deducted at the time your net pay was lower then. And so any Universal Credit payment would have been higher than it should have been.

On a separate point you need to remember to include the tax refund in the appropriate box on your 2017:18 Self Assessment return when you come to file this.

calcotti

Mejustme wrote: »

That’s ridiculous!
It’s not earned money. If that’s true, the system is wrong. I paid too much income tax, a refund is only due on the basis that it was overpaid in the first place.

Can’t be right.

I agree it's unfair but it's the rules.

As dazed and confused says for people who were on Universal Credit at the time they over paid tax it's logical because they would have got more benefit previously so this can be seen as a correction. However I would suggest that if people are getting UC, even if they are earning it is likely that they are not earning enough be paying tax

However many people will only be on benefits now because they have had a change of circumstances, like yourself. They will not have been receiving benefits when tax was overpaid but now suffer a loss of benefits because of the refund. This effectively means that they do not get the full refund of tax paid which they never owed in the first place.

It is worth noting that this is a deliberate change of policy because for previous benefits tax refunds are ignored as income and are treated as capital which, for most people, has no impact on their benefit amount.

If you don't like it you can raise the matter with your MP (but your UC in January will be reduced).

Dazed_and_confused

If you don't like it you can raise the matter with your MP (but your UC in January will be reduced).

Bit harsh for MP's to do that just cause someone's not happy

calcotti

Dazed_and_confused wrote: »

Bit harsh for MP's to do that just cause someone's not happy

Surely it's the role of MPs to listen to grievances of their constituents and take matters up with the government as appropriate. As per my previous note there has been a change of policy and it would be completely appropriate for MPs to ask if this was appropriate.

Dazed_and_confused

Correct.

My post was really a joke about the very end bit of yours, which could have been interpreted that if the op queried this with their MP then as a result of doing that their UC would be reduced in January.