A married man with 1 child earns 420 pounds a week and gets tax credit. If he increased his earnings to 520 pounds a week would he be better off, or would corresponding loss of tax credit mean he was working for nothing or nearly nothing?
Am I the only person in the country that has ever asked his boss for a reduction in his wages? Yes I did say reduction, he willingly agreed, but of course asked why. I had worked out that by getting a couple of pounds less I was entitled to free school meals for the kids, free prescriptions for me and the my wife, free glasses, dentures, dental treatment etc, etc. This was about 15 years ago so things may have changed since.
Income wise, he would be better off. Additional tax and NI to pay, but any reduction in tax credits wouldn't be anything like as much as the increase in pay. If he went from 420 to working for nothing or nearly nothing for the same hours, there would be a substantial increase in tax credits.
'tax credits' is a poorly organised government fraud - it will be replaced in the fullness of time - meanwhile the govrnment are more than happy to exploit your situation
be sure that any increase in income is not declared prior to April (they only know what you tell 'em coz they is stupid) - any declared increase in income will be back dated for the whole of the previous tax year and you will have to refund your tax credits accordingly - i think the threshold is
12500 per annum whereby you will have to refund alllllllllll credits recieved whcih could be in the region of 6000
you forgot to mention him refunding credits for the whole of the tax year which can conformatably wipe out any benefit in wage increase he will get (and some) - unless he doesn't declare the increase until after April
Couple, on gross earnings of £420pw, 1 dependent child, no disabilities, you'd be looking at the base £10.52 pw Child Tax Credit, and a net wage of £318.33.
Couple, on gross earnings of £520pw, 1 dependent child, no disabilities, you'd still be looking at the base £10.52 pw Child Tax Credit, and a net wage of £385.33.
In the first scenario you would start to qualify for Housing Benefit ("rent rebate") if your eligible rent were above c.£100 pw, and Council Tax Benefit if your liability were above c.£1700 pa.
Why would he refund credits for the whole of the tax year? His income for the year in total would be a certain amount. Thats what an award can be made on based on his estimate - then adjusted after year end figures are known. Gosh - just like we do now.
depending on the impact the increase has on his claim - i.e. if he is currently entitled to 3k p.a. - and with his pay increase this is reduced to 2k p.a. - and he declares the increase before the end of this month - he will be expected to pay the government back 1000 (the whole years tax credits he is no longer entitled to) - he will get a demand to that effect - wheras, if he keep stum until next month, he can keep it, and will have the reduced benefits for next year - and that's why the whole sytem is a fraud !
Eh? Tax year has already started. If he has a change in income this month, it doesn't affect last year's award. And notifying them immediately of expected earnings for this tax year will mean little or no overpayment. Tax credits don't go on what your salary is at end of year, they go on income for the year.
Either he earnt last year something similar to what he gave his income as at the time, or any overpayment will be sorted from actual income. Can't see how you'd expect him to keep 1000 or have it as overpayment simply based on April/May months.
not sure what the threasholds are - but one single wage packet could disqualify him from tax-credits altogether - in which case he will have to pay it all back - which is a unfair way to handle benefits at all - the government know that - they just not bothered
hardship doesn't care whereabouts in the tax year it takes hold - and neither should benefit claims
That's the key issue, TCs aren't benefits and GB doesn't want them to be regarded as such. The IR are not used to considering hardship, dealing with the real and immediate needs of benefit customers. They were given the job as gordon controls the IR he simply doesn't trust other ministers or depts. As a prime minister he will be a control freak rather like Mrs T. Well at least that will mean less squirming and avoiding of responsibility. We may even see some corrupt minister sacked/forced to resign.
OK, so he might get a "bumper" pay packet in March (say), at the end of the tax year ...
"JethroUK" wrote
But he'll be swimming in dosh from his huge pay packet that he's just received in March. That should easily be enough to pay back any overpayment in tax credits, with some left over... [Or else the tax credits wouldn't have been overpaid.]
He will have effectively had an interest-free "loan" (of the amount of the overpaid tax credits) over the year!
"JethroUK" wrote
Agreed. He should really be charged interest on the loan which he had over the year, as well as being required to repay it.
But hold on, he wasn't to know that he'd suddenly earn lots at the end of the tax year. So perhaps might be OK to let him off without paying any interest on the "loan"...
But as he actually earned much more than he thought he was going to, he shouldn't be allowed to have the level of tax credits based on what he had *thought* he was going to earn, should he?
His single wage slip wouldn't make a difference. He tells them of his new earnings - which are in current tax year, not previous tax year. Then award adjusted for this tax year, as necessary. Not sure how you'd have hardship either. A change would be adjusted for the tax year based on whats already paid. And an increase in wage meaning a decrease in tax credits of that scale will mean a net total of more money coming into the household anyway. Hardly hardship.
It's clear from your various postings that you do not understand how tax credits work.
Your award for the current tax year 2006/2007 is based on your previous tax year income (2005/2006). There is a "buffer" or "tolerance". This was previously £2,500 pa. If your income in the tax year was no more than £2,500 more than in the previous year your award was not adjusted downwards. From April 6th this buffer has risen to £25,000. You can earn up to £25,000 more than in the previous year and still not see any award adjusted downwards.
Where an increase in income will lead to a reduction in entitlement there are advantages and disadvantages to reporting this "in year" as compared to allowing it to ride and be "reconciled" in the next award. On the one hand, people may see more Housing and Council Tax Benefit if they wait until reconciliation, because the are overpaid then, because of ongoing overpayment recovery, effectively underpaid, resulting in more HB/CTB overall. On the other hand, many will be most comfortable knowing that what they are getting is what they are actually due. But in either case the amount of tax credits payable in total remains the same.
There is no set cut-off point in the way you imagine. It is hard to envisage a way in which your earnings for any particular week in the current year could cause you to lose all of your entitlement for that year such as to cause you to have to "pay it all back".
Where people have been overpaid there are set hardship limits which restrict the amount that HMR&C can recover.
This is not to deny that there are massive structural and administrative problems with the tax credits system - see any number of previous discussions on uk.gov.social-security...
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