Tax Credits Overpayment

PNELancs

When my daughter went to university last year, our Tax Credit claim ended as it should. We’d declared our expected income for the year starting in April based on the hours we were working at the time and as nothing had changed between April and September we expected that would be that.

However, once our income went down because of the loss of Tax Credits, my partner decided to increase her hours to compensate partly. This obviously resulted in our earnings for the year being higher than we said in April and we have now received an overpayment notice. It’s not much in the overall scheme of things but it was unexpected because we thought our claim would be assessed on our earnings until September. I’ve checked with the helpline and and they’ve told me the overpayment is correct, so I’ll have to take the hit.

As someone who has worked in the benefit system for many years previously, I consider myself pretty savvy with all benefits. As a consequence, I suspect if I make such an error it’s likely othe a may do so and the rules should be made clearer in communications.

Unless of course anyone knows different and I’m being fed a line by HMRC!

calcotti

There’s a lot of information here, whether it helps answer your question Idon’t know https://revenuebenefits.org.uk/tax-credits/guidance/how-do-tax-credits-work/calculating-tax-credits/

PNELancs

calcotti wrote: »

There’s a lot of information here, whether it helps answer your question Idon’t know https://revenuebenefits.org.uk/tax-credits/guidance/how-do-tax-credits-work/calculating-tax-credits/

Thanks, at first glance it seems to confirm what I’ve been told by HMRC. I know the system isn’t fair in a whole host of ways but it does seem unfair to be penalised for something you change when not receiving payments. It’s only a small amount for us but what if someone ends their claim, starts work and earns a sizeable amount from Sept to March? They could end up having to repay everything they were previously paid between April and August.

calcotti

Tax credits have always been somewhat apart from other benefits because of the way they are calculated (and run by HMRC rather than DWP). For people with some variation in their lives but within the tolerance zone they provide a stable benefit without having to constantly report small changes. However people often experience bigger changes which result in overpayments.

Darksparkle

I think it was done this way because until RTI came in, HMRC had no way of knowing what someone earned each week/month so could only use the yearly income. It may be unfair but it is correct.

PNELancs

Darksparkle wrote: »

I think it was done this way because until RTI came in, HMRC had no way of knowing what someone earned each week/month so could only use the yearly income. It may be unfair but it is correct.

And to calculate part year awards would be problematic because of the way RTI works. Having dealt with benefits before feeds from HMRC to DWP came in, I can also vouch for how exceptionally difficult and time consuming earnings cases used to be.