incometax andchild tax credit help required

kamp013

Hi!
I hope someone can help me here.

My wife has two part time jobs. One is the main job where she works 16 hours a week and earns £395 per month. The second is where she works 7.5 hours a week and earns £205 per month.

We have had her tax allownace spilt between the two jobs so that she pays no tax at all on the first job and the tax code for the second job is 59T. But since this change with the 10p tax allowance my wife is paying a lot of tax (double) on her second job.

I thought the goverment was going to compensate by using the tax credit system to compensate the people affected by the 10p tax blunder...is that correct???
If that is correct then the new tax credit forms that we received yesterday does not show ny extra payments that my wife will receive. The joint income of mine and my wife is £37200 per year. We have two children aged 4 and 7 and all this time my wife has always received £45 in tax credit and the new tax credit for the new tax year is going to be the same.

My questions:-

• Is there anything we can do so my wife does not pay so much tax??
• If we were going to be compensated by tax credit, how come we are not getting any in the new tax year??

Your help is much appreciated. Where is the logic in this new tax system??? Low earners have had theit tax doubled and high earners are paying less...What a mess.

mitchaa

I thought the goverment was going to compensate by using the tax credit system to compensate the people affected by the 10p tax blunder...is that correct???

The joint income of mine and my wife is £37200 per year

No, that is not correct, that was initial plans, but it was deemed to be far too time consuming and very complicated in order for them to go down this path.

If they did go down this path, luckily for you that they didn't, you wouldn't have gained a penny anyway due to your income. You are not eligible for WTC and never will be on an income like that. The £45 in tax credits has nothing to do with this, that is a totally seperate thing and is called CTC (Child tax credit) You only receive the basic £545pa entitlement of that due to your income. (£21-56k ish receive the £545pa, 56k+ dont receive a penny, and <£21k ish receive more)

As another point, the 10p tax threshold was only accountable for £223pa. You were only taxed at 10% over the 07/08 PA threshold (£5225) for £2230, so in effect 10% of £2230 = £223.

To compensate the loss of 10p tax for the low earners, the government have increased the PA for 08/09 (£5435) to £6035. This will happen in Sept this year but be backdated to April 08. This works out at £120pa extra for the tax payer (20% of the £600 PA increase)

You as a higher earner will have gained from this aswell, you are also given an extra £120pa or £10pm.

So when you factor in the savings as a couple you will be £240 better off per year, but down the £223 your wife will have lost by the removal of the 10p tax rate (So as a couple you are better off)

You will have gained anyway by the reduction of the 22p down to 20p so again you will be better off than before.

There are still some losers, ie single people that lost the full £223 but only gained back £120, so £103 down. However with the upping of the £5225 threshold to £5435, this equated to an extra £42pa (20% of £210) so real loss to those people will be £103-£42 = £61pa or roughly £5pm.

This is the very maximum someone will have lost, £5pm under these plans. When you factor in the NI also as this was increased too, it will more than likely be less than £5, probably about £3pm.

You are better off as a couple anyway as you have gained 3 times. (Your 22p down to 20p, your wifes extra £120pa and your extra £120pa)

The both of you will get an extra £60 in your september pay packets to count for the 6 months (Apri-Sept) and then £10pm after that to make up the £120.

Hope this helps