Tax Credits: Why So Complex? discussion

eadieb · 29 July 2009 at 3:57PM

tpic69 wrote: »

if your award goes off the previous year how come my tax credits went down for this year from £100 to £38 when i told them my eldest daughter had moved out?i rang them and asked why it had gone down now so much if it goes off last year,when also my husbands wages were a lot less as he started back in the raf again in april,they said its complicated and the lady couldnt explain to me,and im not a stupid person!!so were being penalised this year when my daughter was with us for all of last year,how does that work and should it go down so much,im losing £64 a week which doesnt seem right,but its made up so people cant understand how it works.i think its a very unfair,complicated and complex system made up so people wont understand it,so ye were struggling now but who cares.if we was on benefits we`d be better off!!
a very angry tax payer,full time mum and unfortunatley british citizen,proud to be british,mmmm not at the moment,we need to be looking after the tax payers as what would the government do if we all decided to go onto benefits??
sorry to waffle on,but im so angry..
we`ll never better ourselves with this system.

You should be able to check on this years notification letter 2009/10, the amount it is using as your annual income amount. See if they are using last years figure. They wont use last years figure if your income has gone up and you have told them its gone up. If the income figure they are using is much higher than what you really do think you will have coming in during this financial year, then you can ask them to change the figure to an estimate of what you think it should be. BUT be careful because every penny you earn over your estimate in this financial year, will be counted as an overpayment. When a child is taken off the claim it is counted as an immediate change of circumstances. They will backdate the change to when it happened. The amount tax credit pays out is based on some basic allowances for your family make up. Each child counts for a certain amount of allowance each year. When one is taken off it can make a huge difference. its the same when parents have 16 year old school leavers who wont go into further education, then the parents lose the child benefit and as soon as you lose the child benefit for a child, you stop being entitled to tax credit for them.

I would suggest going to a Citizens Advice Bureau with this years and last years notices and get some advice about whether tax credit are doing it right. Make sure your eldest child is on your last years notification whilst they were living with you.

PeteHi · 29 July 2009 at 5:03PM

Its confusing me. My p60 says I earned £1000 more than my salary is, despite not recieving a bonus. My pension contributions have definitel not been taken into account.

Also, are company cars taken into account as they are a benefit (despite the fact I get hammered for tax on it already?).

One final question... our child is now 18 months, am I right in thinking everyone receives tax credit for the first 12 months?

and maybe thats why theyve told me Im entitled to the grand total of £0.

Kevin-E · 29 July 2009 at 5:32PM

pinkpig08 wrote: »

I used this number yesterday and the woman I spoke to asked if that next time I called could I use the number from the pack, as my call was being registered as coming from overseas! She said they record data as to where the calls come from. I was actually calling using free minutes from my mobile phone - not sure if that's why?

When you dial an 0845/0870/0871 number the software at the end of the telephone recognises the incoming call. When you go in directly on the geographic number it flags up on the screen that the call is from overseas as the geographic number is only advertised for overseas clients (you cannot use the 0845 number from abroad, it will not work). The truth of the matter is that if there is enough volume of calls the revenue from the incoming call is split between the telecom provider of the 0845 number and the owner of the number, its a rip off. It would also appear to contravene the anti-competition legislation but as our governments are corrupt ??????

I think the truth of the matter is that they are obliged to accept your call on any number that reaches their call centre. If they come up with that again then ask the following:
'Please understand I am not trying to be offensive to you but need to establish my rights and therefore I say to you the following; Under the Freedom Of Information Act I request the geographic number over which the anti-competitive premium rate number 0845 300 9000 is overlaid. Please note that according to the Act such a request can be made by way of conversation in person or by telephone. I require this information so that I can redial on a proper geographic number that allows competition between telephone providers as set out in the legislation framework that allowed the public telephone service to be privatised.'

If you prefer you could write or e-mail a FOIA request and they are obliged to provide the information.

kei_2 · 29 July 2009 at 5:48PM

eadieb wrote: »

. The catch is, if at any time, you ring tax credits in the current financial year, and tell them your wages have gone up from the figure they set, then you are effectively giving an estimated income. As soon as you give an estimated income you lose the £25000 disregarded income increase.

Unless this has been changed in the past 2 years for which i apoligise in advance if this is the case, then this is incorrect; if the estimated current year income is lower than previous year income then the band is removed and likewise if the income goes above the band. Any current year income increase within the £25000 band leaves the band intact.

I hear people say that tax credits is based on previous year all the time but this only applies to one scenario; if the claimants current year income has increased but not more than £25000 then the current year income is disregarded.

All claims prior to 06/04/06 were based on a similiar system except as opposed to a £25000 band it was about £2000.

I just wish they would put an extra box in the renewal:- will your income be the same as last year? If not what will it be?

as an example, last year tax credits set my annual income at 22,000 for the year, but I actually earnt 27,000. Due to past experience, I made sure that during 08/09, I did not ring up and change the income they set at all. Result after renewal, no overpayment for this year!

Theres a catch to the new £25000 disregard system, hypotetically speaking; during the renewal period - April to July then the system is paying the claim based on £22000 when it should be paid against £27000 meaning any payments from July through to the following April have to be readjusted to stop an overpayment or stopped completely if one has already occured.

During the renewal period the claimant should not be informing of any changes unless they have occured within the last 3 months. Ideally the renewal should MATCH the details held by the tax credits system already.

On a general note, the system is incredibly complex. Tax credit seem to add and make up the rules as each year goes by, probably because when it was first introduced it was not thought out properly. People on a low income, with frequent changes in jobs have enormous difficulty with this system. the notifications letters are still not designed to spell out the calculations in a simple way. If I want to find an answer to a general question about tax credit then I will usually phone at least 4 or 5 times to get a variety of answers and try to work out which sounds the most plausable.

Pretty much sums it up.

When tax credits was launched it was far too ambitious, tried too much at the same time.

The system on paper actually looks pretty good; each claimant is paid out based on their own individual circumstances. In practice it is absolutely horrible to administer because with so many variables enevitably comes complexity - no claim is the same so it is virtually impossible for anyone to gauge.

A system that attempts to cater for all needs but unless the change affects the whole financial year then you leave yourself open to an overpayment that pretty much no one can forsee.

Like lots of public services, it needs to be streamlined and bureaucracy removed. Too many zig-zags when a straight line would suffice.

dave2 · 29 July 2009 at 6:05PM

Note that for every £1 you earn over around £16k the tax credit is reduced by 39p, which is effectivekly a 39% income tax on top of the exisiting 20% or 40%!

Um, what? You have it the wrong way around, when you are getting tax credits you are effectively paying say 10% tax rate, and when you earn over the threshold you begin to go back to the normal 20% tax (before counting NIC of course).

notsorichandnotsofamous · 29 July 2009 at 6:08PM

I rang tax credits about an hour ago to make sure that I had sent back all the info they required from me.Up until October I was claiming both tax credits and child tax credits as part of a couple,since October I have been claiming as a single parent.
I was advised that they had received the earnings for the single parent claim but hadn't received the info they needed for the old joint claim and I would need to ring back with my earnings for 2008 - 2009. I didn't have my p60 to hand at the time but said it is what I have put down for my single claim,I was advised that they couldn't take the information from that claim and would need the earnings from me verbally ?.Whilst going through some other details I was asked about my current employment to which I replied that I had been made redundant 7 weeks ago and was claiming JSA,I was then told that they where unaware that I was unemployed ??? They would need dates of when I started the JSA claim and whether it was income or contributions based ????
I know full well that I rang to advise them that I had been made redundant,I spoke to someone who advised that they had already been informed,which must have been done when I made a claim for council tax benefit ??
After coming off the phone I then started a manic search for the info they now said I needed to give - p60,correct dates for claiming JSA and whether it was contribution or income based,I also found a couple of letters from HRMC,one saying that as I was now working less than 16 hours I would not be entitled to working tax credits and the other with a final amount of working tax credits that would be paid to me for the 2008-2009.I rang back 20 minutes later with all this info(spoke to someone different) and was advised that my details did state I was unemployed.
So it does appear that their right arm doesn't know what their left arm is doing and they don't know their ars*s from their elbows !!!

Nuck_the_king · 29 July 2009 at 6:16PM

subsoniccoyote wrote: »

I am not trying to defend the Tax Credits System but I need to point out few facts -

The renewal:
If you dont provide your income details for last year they don't know how much they should be paying you this year. If you are asked to provide the income and don't, your claim is ended. If you do it, you are 'renewing' your claim.
Maybe not the best wording but the government don't always use the right words.

Tax allowance:
If someone is self employed how can they get their allowance paid to them? And if WTC was paid through the tax coding this would have exactly the same issues other than that you will receive your payments via your pay instead of straight in to the bank. It wouldnt solve any of the issues that exists with the current system. Actually, I suppose the issue surrounding bank details may be sorted. Personally I think it would probably cause more problems as it would be messing with your tax code. WTC was previously paid via the employer but this was a total balls up so the current system was used as an improvement - although by no means perfect.

Overpayments ARE avoidable:
Overpayments are avoidable if you follow each and every bit of guidance to the letter - however most people dont actually read all of the guidance and award notices due to the amount there is to read. Most overpayments are currently caused by late notification of a change of circumstance or under-estimating income. TCO in previous years did cause a lot of overpayments which I do appreciate.
A number of claimants think they only need to report changes of circumstance when they receive their renewal forms - obviously not the case and all changes should be reported ASAP.
With regards to under-estimating income, if a claimant updates their current year estimated income and the figure used is lower than what they earned in the previous year they do not have the ability to use the £25,000 income disregard. When you provide the lower figure your award is re-calculated using this lower income and the award increased. But when you declare the income on the following year's renewal and this income is higher than the estimate it means you have been overpaid. TCO could probably avoid a high number of overpayments by giving this warning - written in clear English on a basic letter - when a customer provides a lower estimate. It could advise that the letter must be signed to confirm you understand what could happen if you under-estimate your income and if the letter is not confirmed in writing (or by telephone just like the renewal) the new estimate will be disregarded and the previous year figure wil continue to be used.

Until the system has been overhauled, my own advice would be to notify of any increase in income in the current year but if there is a decrease and you can cope with the same payments until the end of the year, wait until the renewal at the end of the year. If you have been underpaid you will normally receive a lump sum.

ssc,

Although I think that many of the points you make are fair, it did seem to me much simpler for the first year that we received some form of tax credits for our daughter (which I think was 2001?). My employer simply changed my tax code so that I could earn more before I was taxed. As I remember, I needed only to let them know that I had had a child, and the rest was automatic. It didn't depend on what my income was for last year or next year, just on how much I actually earned in a particular month.

Now, I appreciate that for those who are self-employed, or for those whose incomes vary hugely from month to month, there would be the same over- and under- payment problems. But, for the large number of people on PAYE taxation, with regular and unchanging monthly salaries, this system seems to me to have been so much simpler.

Also, I am a teacher of Maths (and therefore hopefully both literate and numerate); and so if it took me 2 hours to complete the first set of forms, then I wonder how many people (perhaps who REALLY needed the money) simply "fell at the first hurdle" because they were too intimidated by the form? To me, this is the really disgraceful part of the whole thing.

To be entirely fair, since filling in the original form, I have not had any problems in terms of over- or under- payments; as soon as they send me the form, I find my P60 and tell them how much I was paid, and then guesstimate how much I will be paid for the coming year (which is normally fairly predictable). However, I do appreciate that, if your income is less predictable, then it must be very hard to make sure that the numbers are correct; you have my sympathy!

Nuck.

dave2 · 29 July 2009 at 6:36PM

Yes the tax credits system is overly complicated and inherently prone to mistakes, not forgetting poor systems and insufficient staff training. On the other hand there is no good solution. It seems obvious that a tax code adjustment could sort it all out but unfortunately it's more complicated if you think about it.

Firstly the calculation is different so the tax code itself would have to change if you got a pay rise. Maybe they could add a letter to indicate a tax credit band but that means every single employer has to pay for upgraded software and payroll staff training.

OK, maybe that would be worth it but unfortunately quite a few companies are actually extremely poor with their payroll. Returns are sent in late, PAYE is paid up late, they make mistakes on their returns, mistakes on payroll, or how about go bust owing staff their pay. For those with a second job, if income varies then the job that the tax credits are applied to will not know about what you earn from the other job. Some people also will not want their employer to be able to figure out what benefits they're getting.

And you would STILL have to call up the tax credits office to confirm all the other info besides salary, and you would still get under/over paid when the tax credit coding notice change inevitably came in late or was misapplied by the employer payroll dept.

Not forgetting the self employed, who do not get a wage. The existing system would still be needed to deal with these people.

alwaysonthego_2 · 29 July 2009 at 6:38PM

I would advice anybody to send their renewals via recorded delivery so if TCO say they have not recieved it, you have proof.

tghe-retford · 29 July 2009 at 6:41PM

If you are single or childless, the tax credits system can be so complex, unfair and a absolute joke - a waste of bureauracy.

Alongside the points that were made in the email, the tax credits system is so unfair to a number of people, if you are single and childless:

If you are under the age of 25 - you get nothing.
If you work part time (under 30 hours), like many who have had to drop to 3-4 day weeks to stay in work or those who are happy to get any work - you get nothing.
If you just happen to earn above the threshold (which isn't that much) - you get nothing.

I would dare say that the majority of low paid workers probably aren't eligible for tax credits or are so put off by the complexity of the system as well as the fear of having to pay back money they cannot afford. The tax credits system for single and childless people stinks - all the media focus on are "hard working families" whilst the rest of us are ignored.

There needs to be a fairer system for low paid workers which benefits everyone.

Tax Credits: Why So Complex? discussion

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