Are tax credits worked out from what you earned last year? - what is in your P60?

A_little_stressed!!

I'm sure somewhere I saw that Tax credits are worked out on what you earnt the previous year, so what I earnt and hours I worked calculates the payments for this year, and what I earn this year dictates what tax credits will pay me next year, is this correct?

I ask because I have worked the 16hrs pw, min wage for over a year, earning £4000ish, this has been topped up by WTC and CTC.

I am now looking for FT work, 40 hours pw, £18000 year, but this gives me less than £100 extra a week, and I will hardly see my son (2years) at all!

I was hoping on the tax credits going on what I earnt last year, giving me till nxt April to get my head above water, then stop receiving the Tax Credits!

Any help greatly appreciated!

DaisyFlower

They are based on last years figures but you still have to notify them of your change in circumstances as per their website.

mitchaa

A_little_stressed!! wrote: »

I'm sure somewhere I saw that Tax credits are worked out on what you earnt the previous year, so what I earnt and hours I worked calculates the payments for this year, and what I earn this year dictates what tax credits will pay me next year, is this correct?

I ask because I have worked the 16hrs pw, min wage for over a year, earning £4000ish, this has been topped up by WTC and CTC.

I am now looking for FT work, 40 hours pw, £18000 year, but this gives me less than £100 extra a week, and I will hardly see my son (2years) at all!

I was hoping on the tax credits going on what I earnt last year, giving me till nxt April to get my head above water, then stop receiving the Tax Credits!

Any help greatly appreciated!

Also you dont want to receive a great whack now in benefits that you will only have to repay back next year when you tell them of your earnings.

I cant see how you would get WTC based on £4k earnings but yet earning £18k and not suffer any penalties/overpayments/arrears etc.

Best bet is just to ring them up and inform them.

A_little_stressed!!

From what I can see, my new earnings will mean I don't get any WTC at all, which is approx. £3000 per year.
I do think it's a little crazy, not encouraging people to work and get off of tax credits all together.

I'm really doubting about going FT now, with less than £100 a week extra, I'll have more travel costs, need to by suits etc as current job has uniform, also paying for prescriptions (I have loads!) and dentist and glasses, I think I'm going to be losing money!

The only positive way to see it is the sooner I earn £18000, the sooner I can earn more from experience etc! I'll lose out now, but will be better off in a few years

mitchaa

A_little_stressed!! wrote: »

The only positive way to see it is the sooner I earn £18000, the sooner I can earn more from experience etc! I'll lose out now, but will be better off in a few years

Bingo...You got it in 1:T

Stay at the bottom and you'll always be there.

Dont doubt about FT, just do it. £100pw isn't to bad, £425ish pm better off and like you said career progression.

Dont get caught in the benefits trap, seriously you may never get out. You dont want to live life like that.

JessicaF_2

Hi

If your income for 2007-2008 tax year was around £4000 then your tax credit payments for 2008-2009 (that started April 6th) would be based on your 2007-2008 income of £4000.

You will continue to be paid based on £4000. You do have to report certain changes relating to hours and work, but income is not a change that MUST be reported although it is generally better to report income changes.

If you were to report a rise in income - say you think your final total pay for 2008-2009 will be £18,000 when you get your new job, your tax credits payments for the rest of this year, up until April 2009, will still be based on £4000. That is because there is a £25,000 disregard.

This disregard means that your income can rise by up to £25,000 as compared to your previous year income without impacting on your tax credit payments.

However, there is a warning attached to this. You must make sure that as we near the end of 2008-2009 that HMRC have an estimate of your higher earnings for 2008-2009. That is because come April 2009, your 2009-2010 tax credit payments will be based on previous year income, which will then be £18,000 so you will see a large decrease in your tax credits.

Normally HMRC would ask for your actual income for 2008-2009 around June 2009 after the tax year has ended - this is the renewals process. If you leave it until then to tell them about the £18,000, whilst you have done nothing wrong, you will have an overpayment as they will have paid you from April 2009 based on £4000 rather than £18,000. That is why it is generally advisable to report income changes, even if they will not affect your award this year.

Jessica

A_little_stressed!!

Fantastic Jessica, that is what I am hoping for! I completely understand that if you earn more you get less help, and I would be happy only getting the small amount of help next year (I think it would become £46.60 week) I just need this years earnings to help me get on my feet before I lose the help, I barely break even and the whole idea of FT work was to stop me getting into debt.

Also, I won't earn £18000 before April, as I won't start for another month at the earliest, so will have had 3 months on lower earnings, taking my yealry income down a bit.

Thanks everyone, I just really don't want to miss out on my sons life and be worse off, I'm doing this to give him a better life, I just worry he's too young and it will effect him as we are very close.

Loopy_Girl

mitchaa wrote: »

Bingo...You got it in 1:T

Stay at the bottom and you'll always be there.

Dont doubt about FT, just do it. £100pw isn't to bad, £425ish pm better off and like you said career progression.

Dont get caught in the benefits trap, seriously you may never get out. You dont want to live life like that.

But then money isn't everything is it? (well to some people it is obviously) Children are only small for a while.

I'd rather budget well and have a happy well balanced secure child than have lots of cash and think I am a success as I have money in the bank. I AM a success in life as I have a polite and well mannered child who has a lovely personality. Not sure if I could say that if I had bunged her in a nursery for 9 hours a day and they brought her up.

It's everyone's choice regarding childcare and going back to work but, as the OP states she has concerns, so don't assume that everyone is money orientated. There are other ways to be rich in life

A_little_stressed!!

Loopy_Girl wrote: »

But then money isn't everything is it? (well to some people it is obviously) Children are only small for a while.

I'd rather budget well and have a happy well balanced secure child than have lots of cash and think I am a success as I have money in the bank. I AM a success in life as I have a polite and well mannered child who has a lovely personality. Not sure if I could say that if I had bunged her in a nursery for 9 hours a day and they brought her up.

It's everyone's choice regarding childcare and going back to work but, as the OP states she has concerns, so don't assume that everyone is money orientated. There are other ways to be rich in life

That is my big worry, I also have a polite and well mannered, actually completely amazing child, and I truely believe this is down to the time we spend together.

I know money isn't everything, but I felt if I worked hard by day, by evening/weekends I could spend quality time with him, not stressed out because of money worries, and be able to take him to do nice things I can't afford now, like the zoo, I'd really love to take him on a little holiday as he's always talking about planes.
But we could do all this, not spending any money, by staying at home, dressing up and pretending!! & it would probably be just as much fun and I would not lose the special bond I have with him.