reducing work hours - Do you think I would be better off?

hayley25

Hi,

This is the first time i have done this so bare with me and Ill try and give you as much information as possible. I am currently working full time , since last August. I was income support until this time, a single mother to my daughter who will be 7 in April. I was very happy to start working, and be independent. I work 9 - 5.30 pm, get paid every 2 weeks and the amount I get paid 374.60 every 2 weeks, which amounts to 749.20 per month( after tax and NI). The annual salary is supposed to be 11,666,. I pay 43.60 tax every 2 weeks as well as 26.97 NI every 2 weeks.

Now to get to my problem, I have an interview tommorrow for a p/t receptionist job which is 25 hours per week, and 14,000 per annum pro rata. Now my question is, going from the information that I have just gave you, would I be better off working full time or the 25 hours? If I work less will I get more tax credits or less tax credits? I am very confused and dont know what to do for the better. Any feedback would be much appreciated

Thanks
Hayley

Taadaa

CAll the tax credits peeps or go online and check it out, they know best. You have to work 16 hours to be able to claim, so you are still within that. I take it your 14k annual salary is pro rata? - Yup duh just spotted that!

Spendless

You can check out tax credits amount here www.entitledto.co.uk

I also used to have a salary calculator saved to favs. I'll have a look in a mo, and will edit the post if can find it. Here it is
http://www.i-resign.com/uk/financialcentre/tax_calculator.asp




Do you know how much the 25 hours works out at ie what's their f-time hours 40 or less?

hayley25

I think there full time hours amount to roughly 37 hours per week. But I will take it at 40 hours to be on the safe side. I just want to know whether it would be better for me to work far less hours for not that much money less if you know what I mean. The job with 25 hours is also far closer to where I live. The p/t job seems to be far better wages wise than the full time one....but would that mean I get less tax credits also

minimoneysaver

Don't forget about housing and council tax benefits. You may be earning below the threshold to receive them too.

hayley25

hi,
thansk for all you input much appreciated but I have decided to look for a better paid job. It would have been perfect but works out 2 k less a year which isnt worth my while.

Hayley

Poppy9

PT job salary pro-rata is £8750 take home pay £648 per calander month

Current full time job £11666 £811 per calander month

if you work 25 hours per week based on nil childcare costs you would get the following in tax credits.


Final Tax Credit award for period:£4,520.62 per month = £376Working Tax Credit:£2,126.98Child Tax Credit award:£2,393.64

meester

hayley25 wrote: »

Hi,

This is the first time i have done this so bare with me and Ill try and give you as much information as possible. I am currently working full time , since last August. I was income support until this time, a single mother to my daughter who will be 7 in April. I was very happy to start working, and be independent. I work 9 - 5.30 pm, get paid every 2 weeks and the amount I get paid 374.60 every 2 weeks, which amounts to 749.20 per month( after tax and NI). The annual salary is supposed to be 11,666,. I pay 43.60 tax every 2 weeks as well as 26.97 NI every 2 weeks.

Now to get to my problem, I have an interview tommorrow for a p/t receptionist job which is 25 hours per week, and 14,000 per annum pro rata. Now my question is, going from the information that I have just gave you, would I be better off working full time or the 25 hours? If I work less will I get more tax credits or less tax credits? I am very confused and dont know what to do for the better. Any feedback would be much appreciated

Thanks
Hayley

Hi.

The effective tax rate that you pay, as of 5 April 2008, is

39% tax credits
20% income tax
11% national insurance

That is 70% tax.

This applies on all of your income above £6,420 until you are no longer eligible for tax credits.

Unless you are getitng paid so much that you are ineligible for tax credits, (which occurs for you at over £20k/year), it doesn't make sense to work on 70% tax - it works out under £2/hour, which isn't worth your time.

That said, there are a few complications:

* you need to work 16+ hours a week to get working tax credit at all. This is a must
* you need to work 30 hours a week to get 30 hour element. This is an award of £735/year. Thus, on £7.18/hour (the second job), each hour beyond 16 hours/week works out as £2.15/hour after tax, BUT if you work 30 hours/week, this is an extra PLUS £735/year. The £735 works out as an extra £1.01/hour - so £3.16/hour.

In terms of total income, you get, from April:
£545 Child Tax Credit family award

AND a base tax credits award worked out as :
£2,085 Child Tax Credit child award
£1,800 Working Tax Credit basic award
£1,770 Working Tax Credit lone parent award
And, if you work over 30 hours:
£735 Working Tax Credit 30 hour element

That is a total of £5655 or £6390 per year, withdrawn at 39% above £6,420.

The personal allowance is £5,435, and income tax is effectively 31% as of April 5 2008 (20% income tax and 11% National Insurance)

So Job 1 pays:
£11,666 income PLUS
£6,390 tax credits MINUS
£1,931 income tax/NI MINUS
£2,045.94 tax credits withdrawn EQUALS
£14,079.06 net
for a 37.5 hour week (I'm guessing), or £7.22/hour effective AFTER tax

Job 2 pays a salary of what, based on 37.5 hours, is £9,333 SO
£9,333 income PLUS
£5,655 tax credits MINUS
£1,208 income tax/NI MINUS
£1,136.07 tax credits withdrawn EQUALS
£12,643.93 net
for a 25 hour week (I'm guessing), or £9.73/hour AFTER tax

As you can see, Job 2 pays 35% more per hour, although you end up about £1400/year worse off, you are working only 2/3 the amount of time. You actually get slightly more tax credits from job 2 (£4,519 vs. £4,344).

Although job 2 is better, it is not ideal, because optimally you either work 30 or 16 hours a week. If you ask for 30 hours a week, then you LOSE £728 in tax credits from the extra hours compared 25 hours, but you GAIN £735 in 30-hour allowance, so that is neutral, meaning that you end up just paying the tax on it, so you get £5/hour AFTER TAX for the extra five hours, or £1,295 per year. So on 30 hours a week you get pretty much the same in job 2 as you currently get in job 1 on 9-5:30

meester

hayley25 wrote: »

hi,
thansk for all you input much appreciated but I have decided to look for a better paid job. It would have been perfect but works out 2 k less a year which isnt worth my while.

Hayley

£1400 less for only 2/3 of the time working.

Ask for 30 hours, or get a second job.