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To ask how tax credits work?

(23 Posts)
HeyDoggy Tue 03-Dec-19 07:45:51

Do you pay tax and NI on your salary and then get a tax refund later? Is it so that everyone gets the same minimum amount of money each month?

DH and I both work full-time and pay tax and NI via payroll, but we don’t get anything back. We just get the 15 hours free nursery for 3-year old, but don’t qualify for child benefit or tax-free childcare.

I’m wondering if I would be better off going part-time, which means I’d be paid less salary, but maybe get tax credits back? How did you work out how the system works?

Is tax credit the same as universal credit?

dementedpixie Tue 03-Dec-19 07:48:34

Depends on your area as to whether it would be tax credits or universal credit. If you think you don't qualify for child benefit one of you must earn over £60k so you'd be unlikely to get either of them

ColaFreezePop Tue 03-Dec-19 07:49:23

It will be universal credit now for a new claim not tax credits.

Is your job NMW or nearly NMW with no promotion or career growth prospects?

dementedpixie Tue 03-Dec-19 07:49:47

And no you don't get a tax refund unless you have overpaid tax which is more likely to happen if you do self assessment tax returns and/or are self employed

Waxonwaxoff0 Tue 03-Dec-19 07:50:59

You will not be able to claim tax credits any more. All new claims are for Universal Credit.

It's not a tax refund, it's just a top up for those on low incomes. I'm a single parent and work PT, I earn roughly £730 a month so I get tax credits to top up my income. It's just a weekly payment into the bank. You don't need to pay tax to get it.

You may not be entitled to it even if you go part time, it all depends on your earnings. I'm not sure what the cut off is but it's less than £30k so if you and your partner earn that between you you won't get anything.

ColaFreezePop Tue 03-Dec-19 07:54:02

Sorry just noticed you are not eligible for tax free childcare. If you are not eligible for that then you won't get universal credit.

The best thing you can do for yourselves is work out how you can earn more and together lower household costs as paying for full-time childcare while painful is not long term. The site and forums on Money Saving Expert can help you on budgeting.

doublebarrellednurse Tue 03-Dec-19 07:59:32

Your tax etc doesn't just go to tax credits. You probably get plenty back from your tax just not anything in your pocket.

If you don't get child benefit you'll not get TC/UC even if one of you is part time most likely.

Run a simulation on

https://benefits-calculator.turn2us.org.uk/AboutYou

And you'll see what you would get. I'll say now the whole process is an absolute asshole and your wage will drop much before money comes in from the system so be prepared for that.

ferrier Tue 03-Dec-19 08:02:53

So one of you is on over £50k?

Waxonwaxoff0 Tue 03-Dec-19 08:06:15

Just saw you don't qualify for child benefit. Which means one of you earns over £50k? You certainly won't be entitled to any tax credits on that, they are for people on low salaries.

NeedAnExpert Tue 03-Dec-19 08:13:02

So based on your OP one of you earns over £60k and you have a combined income over £100k. But you think you’d be better off part time and that benefits should top you up?

I’m amazed you didn’t set up childcare vouchers before the scheme closed. But otherwise, no, you definitely won’t be eligible for anything (nor, I’d argue, should you be).

dementedpixie Tue 03-Dec-19 08:16:01

P.s. anyone can claim child benefit but if one of you earns over £50k then you need to pay some of it back. Once you reach £60k it all needs to be paid back via a self assessment tax return.

If one of you is a high earner you won't qualify for UC/tax credits

Waxonwaxoff0 Tue 03-Dec-19 08:20:29

In fairness to OP, I don't think she really understands what tax credits are which is why she is asking. If you've never claimed them then you might not really understand the system.

It's not something you claim "back" OP, it's literally just a top up benefit that the government pays to low earners.

Ponoka7 Tue 03-Dec-19 08:40:04

Tax credits, or rather working tax credit is a welfare benefit for those that don't earn enough to live on, to a decent standard of living.

They were called tax credits to take the stigma out of being on benefits (which the right wing agenda had created). They were the new wave of in work benefits. Working Tax credit was for those that worked, child tax credit was to eliminate child poverty.

Now most areas have changed to Universal credit.

As an example my DD received around 1200 a month in Universal Credit. She has two children and her rent is £420 a month. She now works 16 hours. This means that she can earn £287 a month, then she works for £7 an hour for 8 hours a week. Her total salary with benefits is £1520 a month or £18240 a year. Her ex fiddles his finances and only has to give her £120 a month and does no childcare etc.

So she lives on £21,480 a year with Child benefit. To put it into perspective.

She is fortunate that I and other family supply free childcare, or she would be around £50 a week better off in work, but when you're on the breadline, that's still worth doing.

SympatheticSwan Tue 03-Dec-19 08:42:34

OP and her family are not necessarily high earners, they can be nrpf.

Verily1 Tue 03-Dec-19 08:43:07

Tax credits were benefits given to low earners, or mid earners with high childcare costs.

They have nothing to do with tax- the name was just pr

AiryFairyMum Tue 03-Dec-19 13:48:29

Could I ask why you aren't eligible for tax free childcare or 30 free hours please?

dontalltalkatonce Tue 03-Dec-19 13:53:37

There are no more tax credits for new claims. ALL UK councils are full-service Universal Credit and have been for nearly a year. People need to realise the tax credits are legacy benefits which will be phased out entirely in the next year or two and everything will be Universal Credit, including Pension Tax Credit.

So no, it will likely not your going part-time so you can 'get something back'.

Taxes are also not a bank or saving account or insurance policy where 'Hey, I put in, I should be money back'. You do! Good infrastructure, largely peaceful society that allows you to go about your business largely unmolested is expensive, taxes fund this type of society.

Musereader Tue 03-Dec-19 15:02:27

They don't

NeedAnExpert Tue 03-Dec-19 15:06:16

Could I ask why you aren't eligible for tax free childcare or 30 free hours please?

Either they earn over £100k between them or are on visas without recourse to public funds.

Musereader Tue 03-Dec-19 15:10:45

As in you cannot claim them anymore, it has been replaced by Universal credit.

I am on tax credits because ive been on them since before they stopped and they haven't made everyone change yet. I need them because my childcare and rent is equal to my wages and i would have nothing to live on otherwise. It is more than the tax i pay each month to be fair, but they are basically giving me enough to cover my childcare each month. It should go down some in the new year because of free childcare now dd is 3.

HeyDoggy Tue 03-Dec-19 19:10:00

Thanks all. So it sounds more like a variation of income support, which is confusing as “tax credit” sounds like a tax rebate I think. I didn’t realise that it is based on household income, instead of individual income.

I’m thinking of going part-time anyway, as it’s exhausting working full time with 2 hours commuting each day. No time for lunch and I’m always rushing with childcare drop off and pick up (we don’t see DH during the week, only at weekends and don’t have family near).

P.s. someone mentioned about child benefit being for everyone, but there’s no point me claiming it and then having to do a tax return and pay it back again. That’s just more admin I don’t have time for

ColaFreezePop Tue 03-Dec-19 19:18:39

OP if you claim it and aren't a higher rate tax payer it is your husband who will have to do the tax return to repay it. Also if he does a tax return anyway then it is not more admin. It's a simple calculation on the form.

Oh and make sure you have put in a claim for child benefit but decline the payments to ensure your child gets an NI number when they are 16.

dementedpixie Tue 03-Dec-19 19:34:20

You should still claim child benefit and opt out of payment if you don't want to have to pay it back. It gives unpaid/lower paid people NI credits towards their state pension and means your child gets their NI number automatically at age 16

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