Query about Nil tax code and related issues.

Praxis99

It was the loss of my job back in July this yr that participated my bankruptcy in Sept this yr. I have been living on benefits since then (unemployment, council and housing benefit - I rent my home from a housing association). I didn't believe it would be possible to do so but it is (albeit in pretty straightened circumstances than I've been used too!).

Anyhow things job wise seem on the up and I expect to be back in employment come the new year.

I know it can be seen as something of a moral issue by some (particularly some of the less friendly visitors to this board!) but I really want to try and avoid an IPA so that once discharged I can quickly start to build up some savings and hence avoid living on the knife-edge I do at the moment where a major expense could leave me utterly sunk financially.

Its also about motivation I've spent the last few yrs in well paying jobs where everything was sucked away servicing debt, I don't want to spend the next 3 in a similar situation where at the end of the month I've little or nothing to show for my efforts financially.

Its therefore likely that I will take a part time option (that will pay enough to leave me a little better off financially but not subject to an IPA) hopefully with a view to going full time once discharged.

Anyhow to get to the point, I have a few questions which I hope one of you experts out there can help me with with respect to my Nil Tax code.

(1) How long will my nil tax code last? I am assuming it will be the end of the financial year (31st March 08).
(2)If I get discharged before March 31st 08 (unlikely but a possibility since I'll be 6 1/2 months down the line by then) does the nil tax code stay in place?. If so what will I be expected to do with the excess that I would normally pay in tax? does that still go back to the OR even though I am discharged.
(3) I will almost definitely receive a tax rebate this year what will happen to it and is that effected by whether I am discharged or not at the time. If the OR can take it will they take all or a percentage?

Thanks for your assistance re the above.

tigerfeet2006

The nearer the 31st March you get a job the less likely it will be that you get a nil tax code as it is not worth the paperwork to apply one.

Don't forget though if you get a job then your I&E will change too ie extra money on travel and clothes. An IPA will be applied on any monies above a £90 surplus.

See the table here http://bankruptcysupportersclub.co.uk/OR.aspx

Praxis99

I should be back in work by early Jan and certainly by the end of that month.

As I've said I've looked in detail at IPA thresholds and doc's detailing anticipated expenditure so I know if I take the part time option I will not be subject to an IPA.

One thing that does strike me is that if you earn a £90.00 excess you pay nothing but if you earn £100.00 you pay £50 back to the OR and it goes from there such that you actually have to be earning over £180 excess to be better off than someone earning just £90 in excess (a £180 excess would see the OR taking 50% or £90.00).

I would anticipate that in full time work I would have an excess of at least £400 per month meaning I would pay 66% (£264) back to the OR based on the table I have seen that shows how payments are graduated. This would leave me with £136 disposable and consequently little better off than working part time. That £264 equates to nearly 10K over 3 years, which I why I intend not to be subject to one since I will need all my income to get myself back on my financial feet.

As I've said in my first post some may tut tut about this attitude but there situation is not mine and I feel no moral ambiguity at all. However My main issue is with my queries re my tax code so if anyone has any further to add to my points raised above I'd appreciate it.

ClaireLR

I have a nil tax code, it was set up after my bankruptcy and runs until end of March next year

There's nothing to it really, it goes out of my account by DD and as it was never "mine" I don't miss it

Not sure what would happen with your tax rebate, although I can say that I have had some arrears of wages paid to me today and the OR has said I can keep them as they are money I should have had anyway. I would think this would be the same for a tax rebate. I suppose how much it's for really.

Even if you get discharged before 31.03.08 your nil tax code would stay in place till then

HTH, let me know if you would like to know anything else about it

Claire

tigerfeet2006

Praxis you would actually have £226 excess. The first £90 + £136 but I see where you are coming from.

Praxis99

"Praxis you would actually have £226 excess. The first £90 + £136 but I see where you are coming from"

Tigerfeet, thanks for your comments, However could you explain why this is so? if I understand you rightly you saying that the first £90 is disregarded so that in my example if I have a £400 surplus I will actually pay a IPA based on a surplus of £310 (which at 60% payback would equate to £186), leaving me with a disposable income of £214 (£310-£186+£90)?

On this basis over three years (actually now 2 yrs 9 mths) I would pay approx 6K to an IPA presuming my income did not rise as I would expect it too (until Sept 2010).

However if I work part time (earning up to £90 surplus) from Jan 08 until my discharge in Sept I will earn a max £810 disposable vs working full time and earning £1926 disposable (based on the above calc of £214 disposable).

However thereafter over the next 24 month period (till when any IPA would end) I would have earn £5136 disposable if subject to an IPA or £9600 if not. Meaning remaining in PT employ until discharge will see me £3348 better off in terms of disposable income by Sept 2010 (3 yrs after my BR). Clearly if I get an early discharge this figure will be better still.

Have I now gotten the full end of the stick!

tigerfeet2006

Sorry I hadn't realised you had taken that £90 into consideration my bad.

An IPA would run for 36 months from the time it is imposed.

Praxis99

If the IPA runs for 36mths from the point that it is applied I will be even better off by remaining in PT employ until discharge, its a complete no brainer.

Now anyone up for my original queries about a nil tax code!(thanks for your input ClairL in this regard).

TaxAvoider

An IPA would run for 36 months from the time it is imposed.

I was made BR 28th September by the HMRC petition , my IPA started 18th December and I have 35 more payments to make, so I will still be paying past the 3 years after BR.

Not that I am too bothered to be honest, as noted in other threads, I earn "loadsamoney" and do not have a problem paying 75% of my excess to the OR.

The "Allowances" are pretty generous imho, haircuts lol, I need to go once every 4 months , clothes for me - lol - I am "man at George" - but it is nice that I can look after my Daughter well, and not worry about her needs.

If I work pretty much full time and get lucky with a few "Contracts" I could very well end up paying all my debts early has anyone ever had that happen :rotfl: do you end up still continuing to pay your IPA !!!!!

I fully appreciate that if you are on the borderline / breadline and have many dependants it is sensible to take that all into account, but in my case, in 3 years time I will be 100% debt free and RARING TO GO :j I have given up / written off my Fourties, life begins at 47 1/2 for me :rotfl:

Praxis99

I take your point tax avoider its just that I'd rather live in reduced financial circumstances until discharged knowing that when that happens (and it will in the next 9 months) its full steam ahead and all that I earn is mine to dispose of as I wish and that I won't be paying literally thousands to an IPA (which as the above calc shows will leave me a lot worse off over the period it runs). As I've said its all about motivation and mine will be so much the better for seeing the full financial results of my labours

Post BR I went thru a rather humdrum and de solute period which I am thru with now. I now find myself with a plan of action which I'll know will work for me and keep me motivated and leave me a lot better off in the medium term.

Living on benefits has shown me that you can subsist on a lot less that I might have previously imagined and its built and forged discipline re my financial dealings and control thereof (which is now rock solid). It will stand me in good stead as I move back into employment in the new yr and when I am finally discharged from BR in Sept or sooner next year.

tigerfeet2006

Praxis99 wrote: »

If the IPA runs for 36mths from the point that it is applied I will be even better off by remaining in PT employ until discharge, its a complete no brainer.

Now anyone up for my original queries about a nil tax code!(thanks for your input ClairL in this regard).

Your nil tax code lasts until the 31st March and if you change job before then you will go back to a normal tax code.