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To think my pay rise will be pointless?

(41 Posts)
IamScarfaceClaw Mon 21-Aug-17 13:01:04

I work 30hpw and take home salary is around £1100, I have been in a trainee role for 12 months and have been led to believe that I will be given a pay rise at the end of this month.

Lovely!

However I currently receive tax credits , this takes my monthly income to around £1600-

I did a tax credits calculation with various prospective pay rises (lots of wishful thinking) and it seems that unless I get an astronomical pay rise (1k+, which isn't happening) I will be worse off!

AIBU to think that tax credits should continue to bring income into NLW levels?

anotherAnotherUsername Mon 21-Aug-17 13:28:57

The system is broken. No one should receive more money than they can earn.

Reducing the free handouts is clearly the only thing to do.

IamScarfaceClaw Mon 21-Aug-17 15:26:30

Hmmm...that is the polar opposite of what I think. I don't think the JAMs should become NAAMs!
I think that since we have a 'living wage' benefits should run in line with that.

babybigapple Mon 21-Aug-17 15:29:23

That's why the system is broken. No one needs to be incentivised for increasing their earning potential when they are earning £1600 a month whilst working a £1100 a month job.

Nuttynoo Mon 21-Aug-17 15:36:07

You're a trainee right now. Assume there'll be a time sometime soon when you will earn a lot, so relying on tax credits or making employment decisions because of them is a false economy. You will always be better off working eventually.

IamScarfaceClaw Mon 21-Aug-17 15:38:01

But there seems to be a middle rate of earnings- where I will find myself, where people are worse off-

but jump a few steps higher on the pay scale and I would be better off again- and if it's not always possible for people to cope in that middle period they will miss out on potential career/earnings.

Sorry I know that probably doesn't make complete sense- just musing at the skewed logic.

On the other hand, when UC comes in- I will be better off even with pay rise, but the people earning less than me will be worse off!

IamScarfaceClaw Mon 21-Aug-17 15:39:32

@nutty- I am not making any decision based on it, in my mind the pay rise isn't optional, so I will take it, and be grateful that my work has been recognised- and we will manage.

It still doesn't make it right/fair.

ILoveMillhousesDad Mon 21-Aug-17 15:42:25

The benefits system should not be used to supplement to crappy wages.

That's the top and bottom of it.

ILoveMillhousesDad Mon 21-Aug-17 15:43:49

And that's not a dig at anyone in receipt of these.

This country is broken.

IamScarfaceClaw Mon 21-Aug-17 15:52:54

What should be done?
In an ideal world?
Higher NMW whilst keeping living costs down?

I wish something would change but how would the gov implement the changes?

worridmum Mon 21-Aug-17 16:16:19

yes employers should pay a wage people can live off rents should be capped at affordable rates not increased year on year to increase profits of landlords (the main expese people have these days).

Rent is one of the few things that always raises while wages are frozen etc.

Gorgosparta Mon 21-Aug-17 16:22:32

The introductiin of tax credits gave employers (in their mind) the green to not worry about increasing wages as much/at all.

It was obvious this would happen.

People finding hard to accept better jobs or pay increases.

safariboot Mon 21-Aug-17 16:27:02

I would double check your figures. The tax and benefit system is normally designed so that a rise in gross pay does not result in a drop in take-home income including benefits. Our government might be a bit stupid but it's not that stupid.

TroelsLovesSquinkies Mon 21-Aug-17 17:20:48

I just got a pay raise, not giant but enough to stop my working tax credits, I'm happy for that, only I am slightly worse off each month under £100 so I figure it's a wash.
Now I dread next year I have a horrible feeling they will say Oops sorry you now owe us money. My worst nightmare.

ChangeElectricSupplier1 Mon 21-Aug-17 20:31:24

You are mad to turn down the opportunity of a pay rise! Some people have not had a pay rise for years or only 1%. Why don't you put your pay rise into a pension and your employer should also pay some contributions into your pension

IamScarfaceClaw Mon 21-Aug-17 21:23:26

I'm not turning it down change, but I am moaning about being worse off because of it- and considering the bigger picture re: the benefits system in the U.K.

BarbaraofSevillle Mon 21-Aug-17 21:27:23

You shouldn't be worse off, the extra pay should cause your tax credits to taper away, ie you lose some of it, but not all of it.

Sophieelmer Mon 21-Aug-17 21:30:28

Can you increase pension contributions to reduce the impact of the pay rise? If you salary sacrifice into a pension it reduces your taxable pay, so you could put yourself back into the financial position you were in before but save for your retirement so you have to rely less on the welfare system in th long term

HelloSquirrels Mon 21-Aug-17 21:32:08

Will be the same for me when i get my pay rise. Won't be any better off. Possibly worse off. Silly really.

I'm just focusing on the fact that tax credits will stop when ds isn't in full time nursery so I will benefit in the long run. Shite in the short term though isn't it

ChickenBhuna Mon 21-Aug-17 21:41:22

I can't advise you on what to do op , I feel your pain though.

I took a higher paid role with more hours a few years ago , it was a great compliment to be offered the role as I'd worked hard to gain such a job. I ended up about £300 pm worse off though because my wtc entitlement was slashed.

I'm not saying it's not worthwhile longterm , as the experience is invaluable and my CV is much more substantial but I was shocked how one can go to a higher salary and work longer hours to discover they are struggling financially where they were okay before.

It's not right.

PrincessLeia80 Mon 21-Aug-17 21:42:18

£1600 a month is a lot of money we manage on £1200 a month with no tax credits

ChickenBhuna Mon 21-Aug-17 21:45:46

Depends where you live Leia.

Lagirafe Mon 21-Aug-17 21:51:45

How much worse off will you be? You can increase your pension contributions to decrease your taxable income for tax credits purposes.
Also isn't there a £2500 disregard for in-year increase in income which might give you a few months grace? Depends how much of a pay rise!

IamScarfaceClaw Mon 21-Aug-17 21:59:22

We will probably only be worse off by around £100, and we will manage- it just means restricting the food shop slightly.

It's more the ridiculous fact of it. There must be some sort of tapering tax credits scale (like the benefit cap) but if that's set at £1500 for a family of 3, and the 'average' individual income is meant to be £25 K then something is not right!

ChickenBhuna Mon 21-Aug-17 22:02:53

It was explained to me as something to do with pay brackets. Because I'd only just crept into the next bracket with my pay rise , it meant I felt the full effect of a wtc entitlement slash.

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