Well, that might seem odd to you, but to me it seems odd to see you using three question marks when only one of your three sentences is a question, and the other two are just plain statements.
What you observe is nevertheless correct. Tax credits are based on previous year earnings. When you think about it, it's difficult to see how it could be otherwise, since nobody will really know what your current year earnings are going to be before the current year is over.
Wading through the form to see if my wife and I are eligible for tax credits, it appears to be based on April 2009-2010 earnings?
Am I missing something? I can't see what relevance my earnings for that period have to my status in November 2010?
Correct.
No, you are not missing anything - this is why the government ends up clawing money back from people time and time again. If circumstances change, it's sensible to telephone them straight away and tell them so they can adjust the payment immediately.
They are *initially* based on your earnings last tax year, and that's what you have to give them when you fill in the claim. But what you end up being entitled to is based on a combination of last year's and this year's earnings, and can be adjusted this year based on an estimate.
If your income this year is lower than last year, then your entitlement is based on this year's earnings.
If your income this year is higher than last year, but by less than
25,000 [1], then your entitlement is based on last year's earnings.If your income this year is more than 25,000 [1] higher than last year's, then your entitlement is based on this year's earnings minus
25,000.So if you expect your income this year to be less than last year, after they've sent you what you're getting (if anything), you should phone them and give them an estimate of this year's earnings. Similarly if you expect to earn more than 25,000 more, otherwise they'll overpay you and claim it back at the end of the year.
Yes it is a stupid system, blame Gordon Brown. They should at least ask for an estimate of this year's earnings on the claim form, but they don't.
[1] Next tax year it will be lowered to 10,000, then to 5000, and I think they're introducing a disregard for income falls as well.Have something to add? Share your thoughts — no account required.
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