£25,000 tax credits disregard

mazjam

vicki_b wrote: »

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?

here is an example.... (i have posted much of this elsewhere)

My partner is self employed, so it takes us 18 months to have final figures to give the tax office, just to make it more complicated, and his income changes a lot if he gets in a new contract he wasn't expecting.

We have had overpayments year on year since the system came into being, have paid them off willingly, and so now are extra careful about reporting changes promptly and accurately.... that really does not help anyone !

08/09 we estimated our household income to be £10k. Previous year income was £10k. In july he had a contract offered which increased our income by an estimated £5k for that year (total £15k for the year) which we immediately notified the tax credit office of, in the hope our figures would be ammended and an overpayment avoided. We were not advised about the 25k rule, and our award notice showed the increase in income the payments did not change. I queried this and was told they were correct (but not why or how). With no other way to check this, and all info on our award notice being correct, we assumed all was well. Our final income for the year turned out to be £14,500, less than we had estimated and we were patting ourselves for not getting another overpayment..... until the final award notice arrived and we were told we had an overpayment of £1250 for the year. Of course I then send a dispute, and was told everything from we were 1 day late giving figures, to the system did not record correctly the figure we gave. No one mentioned the 25K rule until after 2 dispute letters we went to our MP, who was told the 25k rule was the reason. On thorough review of our award notices I found a note in a small box on the last page of an award notice 8 months after we gave the 15k figure saying we were headed for an overpayment, and had already received 900 too much. Of course, being tucked away as it was we missed it, being as we were used to checking certain figures in certain places.

Basically the 25k rule is NOT A DISREGARD of 25k of your income.... they still apply it, just not necessarily in the current tax year. your income increases without them decreasing your payments, you get overpaid, therefore an overpayment which you have to pay back the next year. Basically it seems to be to reduce workload for the TCO in the current year, but results in stress all round.

I argue that we were:
- misadvised about the overpayment
- we provided figures correctly (v accurately as it turned out) which were not acted upon
-we were not advised of the overpayment for 8 months (though the advise was not obvious or clear)
- the 25k rule was never explained
- the 25k rule is unfair as it would mean us increasing our annual income by 2-3 times for the whole year before our payments would be altered... not a reasonbable action at all, and which clearly puts us automatically in a position of debt.
- if a change is reported it is reasonable to expect this to be considered. the award notice still has to be reprinted and ammended even if the payment figure is not changed. Since the system is computer based payment changes could be easily calculated with no further administrative burdon. I see the 25k rule a a choice thing... saying we will not be penalised if we do not report changes of less than 25k. We should not be penalised for keeping on top of things.

The MP has raised the issue of the 25k rule being unreasonable, and we are going to adjuducation to see if we can win, though we suspect this unfair rule will mean not. We refuse to pay it back as they caused the debt not us. We did everything humanly possible to prevent an overpayment occurring. They, however, did nothing to prevent it.

Also we no longer wish to receive ANY tax credits due to this systematic overpayment... if we dont provide figures they will claim back this years payments too as an overpayment. if we provide income details and are entitled they have to pay it to us. Even with an over payment they will not take the money to directly pay off the overpayment. they will take the 10% or whatever but additional repayment has to be made by us. so they have to pay us for us to pay them back. pointless ! I dont want anything more to do with the system but have no choice it seems !

It is a benefit designed to get the most vulnerable in society into further debt, and dependent upon (or bowing to) the state.

JC9297

It is quite straight-forward really, the 25k disregard only applies when your award is based on the previous years actual earnings. Therefore as your awards have been based on the current years estimated income it does not apply.

sane01

Tax credits are really difficult to get your head around especially self employed. As employed works on the year you worked, self employment is on the previous year. To be honest I always thought the £25k rule was only if you were self employed and it would seem not and I actually thought I knew quite a lot about tax credits.

Maybe you should find someone who knows more about tax credits to explain it to you, as once you understand you will not be put off claiming something that you are actually due.

I hope you do not think I am being patronising about getting someone to explain it to you but everyone is good at something not everything and sometimes it just needs to be explained a couple of times.

Elaine