Overtime gives NEGATIVE INCOME ???

langtone

I think I must be going crazy ( Or Brown & Darling cannot do maths !!! )

I have accepted a job paying around 12000 per year. ( £6 per hour )

Last year I earnt 23000. I have two children and am married.

I will receive working and child tax credit based on this years (2008-09) taxable income and the 2009-2010 will ALSO be based on this assuming I earn more next tax year than this.

I will receive Housing benefit and council tax benefit.

OK. Facts out the way, now for the dilema

The job gives an average 6 hours overtime per week. Great I thought, I can top up my wages for Christmas and a holiday. BUT......

FOR EACH £1 I earn extra:

I lose 20p TAX
I lose 11p NI
I lose 37p from THIS YEARS tax credit
I lose 37p from NEXT YEARS tax credit
I lose 21p from Housing Benefit
I lose 6.5p from Council Tax Benefit

i.e. EACH £1 earnt costs £1.32 and a half pence !!!!!!!

So for each HOUR at time and a half ( £9 per hour ) I end up PAYING £2.92

I have to pay to do Overtime


OR AM I MISSING SOMETHING ???????

Any advice as to how I can make the overtime pay ??????
Any advice as to how I can make the overtime pay ??????
Any advice as to how I can make the overtime pay ??????

lauren_1

I dont think you can add next years tax credit loses in to the equation.

langtone

Even taking next years Tax Credit loss out of the equation ( so I get 4 1/2p per £1 earnt) , 4 hours on a Saturday morning will give me 18p, and the car journey will cost £1 - I lose 72p by going to work !

I MUST take next years tax credit loss into the equation. For EACH HOUR OVERTIME not worked I am adding £3.33 to next years Tax credit award. The lower my 2008-09 P60 taxable earnings, the higher next years award. If I do NO overtime ( assuming 45 weeks, 6 hours per week ) I WILL BE about £900 better off in 2009-10. This is NOT insignificant.

lauren_1

But if its only £12,000 i should imagine you get maximum wtc and ctc and still be entitled to ct and hb.

Have you played with entitled to yet?

langtone

From 5200 upwards WTC is reduced by 37p for each £1 earnt. You are correct for CTC which will be maximum until passing ( which I will not ) 14495. Council Tax benefit reduces as does Housing benefit - at 12000 per year Housing benfit will pay 205.57pcm versus the 495pcm I get just now not working.

[Deleted User]

isnt this a classic case of "poverty trap"?

I suppose my only question is why have you had to take a 50% drop in salary? and please dont take that the wrong way...

bestpud

Yep, that will be the 'poverty trap' kicking in!

I have to say though, we also receive tax credits and have never sat and calculated the impact of overtime in such a detailed way!

A lot can happen in a year and, anyway, presuming you will still do the overtime next year, you will essentially gain the first year of overtime 'free'.

If at the end of 2010, you have not worked any overtime and your award was based on the higher amount, they will pay you the underpayment in a lump sum.

space_rider

I`ve had same problem. The company I work for took on alot of new contracts, it meant that they needed more staff but until they were able to train them I did a good few hours overtime. Now they have increased the staff and they are all up to speed they don`t need me to do the overtime. At least next years tax credit should result in underpayment so I will just use that money towards a holiday for May/June next year. I did plan to bank the extra but that just didn`t happen!