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quick tax credits question

(3 Posts)
montysma1 Fri 16-Nov-12 18:20:25

Sorry, posting here for more traffic.

When the tax credit web site says that they ignore the first £2500 of a drop in income, do they mean for ever or just in one tax year or what? It seems a bit unfair that they calculate the credits on you being £2500 richer than you are.

A drop of that amount would take me into a different bracket, which would give me a fair bit more, but not if they ignore the loss of income.

I'm not usually dense but I cant folllow the hmrc page at all. Also, I am self employed, and the earnings I put in on the forms were an estimate. I made this a generous etimate as I didnt want to be awarded too much and have to pay it back. However, if my actual income turns out to be lower (as it will this year), then I have sort of diddled myself if they discount a £2500 decrease.

Anyone able to explain how it works? In terms that wont boggle me?

Morph2 Fri 16-Nov-12 18:26:41

the tax credits you receive in this tax year are worked out using your income from the last tax year.

at the end of this tax year you tell hmrc your actual income. If it has gone up but by less than £2500 then it doesn't make any difference to the amount you have received. if your income has gone up by more than £2500 then your award is recalculated and you will have to pay someone back.

Next years award will then be based on your actual income for this year.

Morph2 Fri 16-Nov-12 18:27:15

** some money back not someone

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