Tax Credits help

Hello all, 
i wondered if i could get some advice. My daughter and son in law have just received a letter from HMRC saying they have been overpaid on Tax credits by £600. I am afraid i am of an age that never had TC so i really dont understand them so cannot help. All i know is that they received £200 monthly, then in July of last year my daughter got a pay rise, resulting in them being over the TC threshold, so contacted TC who duly ceased any payments. What they dont understand ( nor do i! ) is how the TC have been overpaid when their circumstances only changed in July, ( they contacted TC in June) when they thought the TC renewal dates ( yearly) would have been July...so they can't see that the have received benefits when they shouldn't. They will call HMRC next week, but i wondered if i could help them by asking th forum. Thankyou 

Comments

  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 12,702
    First Anniversary First Post Name Dropper
    Forumite
    Ferboz said:
    Hello all, 
    i wondered if i could get some advice. My daughter and son in law have just received a letter from HMRC saying they have been overpaid on Tax credits by £600. I am afraid i am of an age that never had TC so i really dont understand them so cannot help. All i know is that they received £200 monthly, then in July of last year my daughter got a pay rise, resulting in them being over the TC threshold, so contacted TC who duly ceased any payments. What they dont understand ( nor do i! ) is how the TC have been overpaid when their circumstances only changed in July, ( they contacted TC in June) when they thought the TC renewal dates ( yearly) would have been July...so they can't see that the have received benefits when they shouldn't. They will call HMRC next week, but i wondered if i could help them by asking th forum. Thankyou 
    Tax credits are based on annual income, what happened in the first few months of the year is only ever provisional.

    This might help you.

    https://www.entitledto.co.uk/help/how-tax-credits-work
  • sheramber
    sheramber Posts: 18,612
    First Anniversary I've been Money Tipped! First Post Name Dropper
    Forumite
    Tax credits work on income for the year from 6 April to 5 April. If your income increases such that you are no longer eligible then that applies back to the start of the year, 6 April. In your daughter’s case that means that payments made from April ,May and June were overpaid. 
  • Ferboz
    Ferboz Posts: 37
    First Anniversary First Post
    Forumite
    sheramber said:
    Tax credits work on income for the year from 6 April to 5 April. If your income increases such that you are no longer eligible then that applies back to the start of the year, 6 April. In your daughter’s case that means that payments made from April ,May and June were overpaid. 
    I apologise for being thick... but are you able to explain why its 3 months overpaid ( which i think it sounds like it is) as if tax credits are paid april to april...she didnt get a pay rise  until July of last year. after reading your reply many times, i can only assume that there could be some sort of advance payments? I am sorry, i dont understand...and my daughter keeps saying that she didnt get an increase until after the 3 months they state are overpaid . Thank you
  • peteuk
    peteuk Posts: 1,211
    First Post Name Dropper First Anniversary Combo Breaker
    Forumite
    Tax credit is calculated on your earnings the previous year, it is paid on a yearly sum then split into 12 monthly payments.  At the end of the tax year it is reassessed on your actual wage for the year.

    In your daughter’s case when she received the wage rise they would have reassessed the whole years payment.  So if she received payments in April, May and June and was then found to not be entitled to TC then the whole year is taken into account, not just the months from the wage rise.  
    Proud to have dealt with our debts
    Starting debt 2005 £65.7K.
    Current debt ZERO.
    DEBT FREE
  • olgadapolga
    olgadapolga Posts: 2,263
    Name Dropper First Post First Anniversary Xmas Saver!
    Forumite
    peteuk said:
    Tax credit is calculated on your earnings the previous year, it is paid on a yearly sum then split into 12 monthly payments.  At the end of the tax year it is reassessed on your actual wage for the year.

    In your daughter’s case when she received the wage rise they would have reassessed the whole years payment.  So if she received payments in April, May and June and was then found to not be entitled to TC then the whole year is taken into account, not just the months from the wage rise.  
    Tax Credits is paid every four weeks, so the annual amount is split into 13 payments.
  • sheramber
    sheramber Posts: 18,612
    First Anniversary I've been Money Tipped! First Post Name Dropper
    Forumite
    If you become ineligible for tax credits part way through the year you are no longer entitled to any payments for that year. So any payments receivedfrom 6 April up to that point are no longer due and become an overpayment.

    You do not get payments for three months and then none. 

    The payments are for the whole year or none. 

    In your daughter's case she became ineligible in July so all payments paid since 6 April are no longer due.

    Tax Credits payments are provisional, based  on the information at the time. When that information is changed the payments are recalculated, based on the new information , and apply to the full year, not just to period going forward.


  • Hermann
    Hermann Posts: 1,353
    First Post Name Dropper First Anniversary Combo Breaker
    Forumite
    sheramber said:
    If you become ineligible for tax credits part way through the year you are no longer entitled to any payments for that year. So any payments receivedfrom 6 April up to that point are no longer due and become an overpayment.

    You do not get payments for three months and then none. 

    The payments are for the whole year or none. 

    In your daughter's case she became ineligible in July so all payments paid since 6 April are no longer due.

    Tax Credits payments are provisional, based  on the information at the time. When that information is changed the payments are recalculated, based on the new information , and apply to the full year, not just to period going forward.


    Does the £2500 disregard have any effect here?
  • kaMelo
    kaMelo Posts: 2,276
    First Anniversary First Post Name Dropper
    Forumite
    There isn't a disregard as such, the £2500 is  just the level at which, if exceeded up or down, you need to notify HMRC and a revised award for the whole year will be calculated based upon the new income details.
    Below that figure there is no need to notify.
Meet your Ambassadors

Categories

  • All Categories
  • 341.6K Banking & Borrowing
  • 249.6K Reduce Debt & Boost Income
  • 449K Spending & Discounts
  • 233.5K Work, Benefits & Business
  • 605.8K Mortgages, Homes & Bills
  • 172.4K Life & Family
  • 246.5K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.8K Discuss & Feedback
  • 15.1K Coronavirus Support Boards