£25,000 tax credits disregard

vicki_b

please could someone explain this for me?

why are so many people paying back overpayment of tax credits back when there is supposed to be a £25,000 disregard?

langtone

Only normally happens when someone has a DROP in wages from the previous tax year and underestimate their earnings

For example if in 2006-07 you earnt 22000 and lost your job at the end of the tax year

In April 2007 you take a job at 14000 and inform Tax credits they will adjust benfits up to the £14000 rate. Then say after 2 months they promote you to a new salary that will give a 07-08 total of £18000 per year BUT you do not tell tax credits ( this is always a mistake!!) you will owe back 37% of the extra earnings come April 2008 ( This will be a bill for £1,480 )

This is why with Tax credits it is SO important that you let them know immediately if you will earn more when you told them it wil be less.

Best way to protect yourself from this is to Overestimate your wages and get a fat cheque come April next year ( assuming you can afford to live on a lower tax credit in the meantime )

langtone

Sorry forgot to say

Another major reason is that the overpayment was on a NEW claim ( for example someone who did not claim the previous year, a new worker, a new couple, a baby arrives etc )

Same reason for the repayment required though, someone Underestimated their annual salary and did not inform HMRC until some time had passed ( or April 5th )

vicki_b

o.k i estimated my partners salary to be £11,000 when its infact £11,309..will we have to pay that £309 back or does it fall under the same bracket?

when i enter in our details to tax credits calculator it says we should be getting about £26/£27 more a week..has the rates for this tax year gone up that much or is there an error?

kerryallc71

i found this for you , someone else asked a question about tax credits & overpayments and the £25'000.00 disregard .. here is a link .. hope it helps ..

http://forums.moneysavingexpert.com/showthread.html?t=867451

see you from kerry ..

here is another link telling you all about the £25'000.00 .. take a look ..

http://forums.moneysavingexpert.com/showthread.html?t=877539

wigit

Hello, my husband left his job end march 08 and i started to work in April 08, his income for 07/08 was far more than what i was going to get in 08/09 so tax credits calculated on my earnings for the current year which was £10500 we received over £220 per week in total for ctc and wtc this was for 4 kids.
As of 6th April 09 hubbi has returned to work and his income will be £26780 and mine will be £9500 for 09/10.
Award notice says that they will calculate our income for 09/10 to be £11280 which will give us a total payment of £236 per week. Now this seems a bit odd to me or do we fall in to the £25.000 disregards bracket.
I do not want to be hit with a big OP at the end of 09/10.
Not sure on the rules for £25.000 disregards but do we have to earn that in the next year or if we go below that amount for 09/10 then will we loose the disregard???????

*****************UPDATE ************************
I am now finding it too difficult to work while hubby works away all week, if i leave my job will we loose the disregards and have to pay it all back or will it just go on my earnings for 08/09 which was £10,604, so still recieve £236 per week. But still not sure if we will have to pay it back when we review next April

LizzieS_2

Your 09/10 award will initially be based on your 08/09 income of £10500. As your income for this year is going to be more than 25K higher, you will be affected.

Assuming you do get £26780 + £9500 (total £36280), this exceeds your 08/09 income by £25780. The first 25K is disregarded, so this year should be based on £10500+£780, ie £11280 (what they've used).

The only other point to note it that if your income does exceed £36280 there will be an overpayment, so keep a check on this and let them know asap if it looks like there will be a higher income.

From 2010/11 your award will then reduce drastically as it will be based on the £36280 income for this year.

wigit

If then for some reason that our income goes down, (say if i was to leave my job if it doesnt work out with both myself and hubby working) what will happen then ?? will we lose the disregards and have to pay it all back

elliebobs

Your award notice will clearly state that you should inform TCO if your income increases above a certain limit and it will state at what limit you should notify them. If in doubt ring the helpline.

If the £25k disregard does apply (i.e not to notifiy unless your income goes above £36,280) then it could come back and bite you at the beginning of 10/11. I know it's along way off but your provisional payments from 6 April 2010 will be based upon your lower income of £11,280 and not the actual 09/10 figures until you finalise your award.

LizzieS_2

If your income for 09/10 turns out to be £35500 or less, it will be recalculated on your 08/09 earnings of £10500

wigit

So if it goes above 36,280 will we lose the disregard or will it just be recalculated again but still with the 25k disregard (i.e 38k less 25k leaving an income of 13000