Pay rise causes loss in benefits

SamanthaP

Hi, my husband was offered a pay rise, which he happily accepted. We claim housing benefit, child tax credit and council tax benefit. I knew our benefit would change but I stupidly thought we would be slightly better off every month. Now the results are in and because my husband earns £280 more per month we lose £250 housing benefit, £200 child tax credit and our council tax increases by £66 per month. So in total we are now worse off by £225 per month. How can this be right?? I don't know how to cope with that much less coming in every month. Any suggestions please?

BAFE

Are there two incomes coming into the house? You could easily earn £225 a month with a part time job.

xylophone

What if he made pension contributions?

Alice_Holt

No, that doesn't sound correct to me.

As an example the calculation of HB includes all income coming into the household including tax credits. So although salaried income has increased, tax credits have reduced and would in part offset the salary increase. The withdraw rate for HB is 65 pence for every pound of your income above the amount the government decides you need to live on.

I'd be checking the HB (and council tax) calculations both before and after the salary increase to check they are correct.
https://england.shelter.org.uk/housing_advice/housing_benefit/how_housing_benefit_is_calculated
Are they using the latest CT figures?


Tax Credits are calculated on annual tax year income, and there is a £2,500 disregard for income increases.

"For increases in income:
- if your 2018/19 income has risen but not by more than £2,500 from your 2017/18 income, your final tax credit award will be calculated using your 2017/18 income.
- if your 2018/19 income has risen by more than £2,500 compared to your 2017/18 income, your final tax credit award will be calculated using your 2018/19 income minus £2,500.

For example, if in 2017/18 your income was £10,000 and in 208/19 your income is £15,000, the rise is more than £2,500. Therefore, your 2018/19 final tax credit award would be calculated based on your 2018/19 income minus £2,500, so an income of £12,500.

HM Revenue and Customs do this to provide extra support if your income falls but also to allow room for your income to rise before it affects your tax credits."
https://www.entitledto.co.uk/help/how-tax-credits-work

You could put the before and after numbers into a benefit calculator to check.
https://benefits-calculator.turn2us.org.uk/AboutYou
But something appears wrong here.

Edit: Xylo is correct to bring up pension contributions, as they are deducted from income in TC calculations, see:
https://revenuebenefits.org.uk/tax-credits/guidance/how-do-tax-credits-work/what-is-income/calculating-tax-credits-income/

Hopefully this is more a helpful analysis than post 2!

TELLIT01

Unfortunately most benefits do have an effective cliff edge at some point and it's possible you've found it. Instead of tapering so that there is a smooth transition and no loss of income, the situation the OP seems to have found themselves in is sadly not uncommon.
Some years ago my brother applied for Pension Credits and he was literally less than £2 over the upper limit to qualify. As a result he got not help with anything whereas others on very similar incomes got help with rent, council tax etc. Very unfair, but that's how the system works.

Smellyonion

The likelihood may be that you were not entitled to some of the benefits beforehand.

elsien

If the OP wasn't entitled to them then why were they being paid?

calcotti

Have you checked to make sure that your housing benefit and council tax reduction has taken account of your reduced tax credits. If you have only told the local authority about the pay rise and not the change to tax credits they may still be using the previous tax credit award.

Alice_Holt

TELLIT01 wrote: »

Some years ago my brother applied for Pension Credits and he was literally less than £2 over the upper limit to qualify. As a result he got not help with anything whereas others on very similar incomes got help with rent, council tax etc..

Eligibility for Guaranteed Pension Credits did indeed entitle the claimant to full help with HB and CTB.
However, if he was only £2 above the GPC limit, then he would have been best advised to make a claim for HB and CTB, as at that level of income help would have been forthcoming (unless his savings were over £16k).
At only £2 over the GPC income, the majority of rent would have been covered by HB.
It's also likely that a small amount of Savings Credit would be payable.


If he was applying for Savings Pension Credit, that did not passport the claimant to automatic HB and CTB. Eligibility to HB and CTB would depend on the usual calculations, taking into account all household income.

Afraid_of_Kittens

SamanthaP wrote: »

Hi, my husband was offered a pay rise, which he happily accepted. We claim housing benefit, child tax credit and council tax benefit. I knew our benefit would change but I stupidly thought we would be slightly better off every month. Now the results are in and because my husband earns £280 more per month we lose £250 housing benefit, £200 child tax credit and our council tax increases by £66 per month. So in total we are now worse off by £225 per month. How can this be right?? I don't know how to cope with that much less coming in every month. Any suggestions please?

For every £1.00 increase in take home pay you lose 65p Housing Benefit and 20p Council Tax Support - there is nothing you can do as this has been the legislation for nearly 30 years.

bigbill

Afraid_of_Kittens wrote: »

For every £1.00 increase in take home pay you lose 65p Housing Benefit and 20p Council Tax Support - there is nothing you can do as this has been the legislation for nearly 30 years.

Do not forget the 41p Tax Credits as well the following year as well?