Tax credits shock

[Squidpinky]

I am trying to work out whether I am being or have been thick or whether the system is so wrong?!

We have been on the old system of tax credits (paid weekly based on your annual income) for about 7 years now. Our income has hardly changed but this year it has.

My husband was made redundant shortly after lockdown and as the highest earner we took a massive cut. I then had to up my hours at my job to full time to become the main earner. My husband was out of work for a while then landed a job which is way more money than he was on before. Tidy I thought - we would no longer need tax credits as our annual income was above the threshold (both full time) Kids are both now at school so thought we would be better off.

I phoned the tax office to tell them about my husbands new job and our new annual income. I was told that we would probably owe the tax office thousands because of this as we had been paid up until now (April 2020 - October 2020 on our old income which was right up until my husband got this new job)

Firstly I am flabbergasted that we owe the tax office thousands when it was un unplanned changed - We didnt know back in April that my husband would lose his job, I would have to go full time and then he would get a better paid job. The tax credits that we were paid meant we could afford to live on our low income but now we dont need tax credits I can completely understand them stopping our payment but why an earth make us pay back April - October?!

I have worked out that if we have to pay them back a sum each month we wont have much left over at the end of the month and would actually have been better off with me being part time and my husband working on his old wage.

Am I missing something here? Am I really entitled to pay back April - October or if you write and explain the situation do they take a view on it? Anyone else experienced similar?

[Sargass0]

Did you update them with your changes?

[Squidpinky]

Yes my husband only got offered the job Monday so phoned them today to advise he would be starting Monday. I also told them back when he lost his job and when I went full time but in that instance our income was almost the same so no changes were made.

[Ylvamoon]

I think it's calculated annually, so if you are way over the threshold you may owe them money, especially if you didn't inform them of the charges on tim.

[TheFormerPorpentinaScamander]

Tax credits are a shiny shower of shit.

We had to pay back a whole years worth when we started claiming. We did it monthly over a few years. I also kept phoning and asking why we had been overpaid by a whole years worth (as in they paid us then decided we werent entitled to them after all). It took approx 6 years to get an answer... they filled it in wrong at their end. Apparently I gave birth and started a new job the same day! I must be superwoman!
But I couldn't 're-claim' the money they had taken back because it had been too long.

Whatever they assessed you as being entitled to this year will be based on last year's earnings. If that then goes up then you will have been overpaid. UC has a lot of flaws, but at least its assessed in 'real time' so you don't get overpayments!

[Squidpinky]

I did inform them though, he hasnt started the job yet he starts on Monday so up until this point the tax credit award was right. I just dont understand how from April - October we were on a low income and receiving tax credits to help us survive and now that we have both got a good job (not fantastic money BTW but better than we were on) we would be expected to pay back what we desperately needed April - October?

[Waveysnail]

The way I understand is that it goes on years wage april to april. So if your husbands wage from now to next April is over the threshold then you will need to pay back. Use online calculator to check it out. You probably can ask to pay back over longer period

[PomBearWithoutHerOFRS]

They seem to do this to everyone. There's no recourse or argument. Just offer them instalments and pray you don't end up on UC of reclaiming tax credits cos that causes a whole new level of their shit to shower.
Sorry OP, it's crap, but it's how they operate.

[Freddiefox]

It’s calculated yearly. If your dh had got the job in April you wouldn’t have been entitled to it. If he has got a job that’s a big increase then when you work out your yearly claim he would have earns too much. So you now owe for that part.

It happens all the time, But because it yearly calculation there’s not much that can be done.

[CornishTiger]

Sadly if your total annual income is over the thresholds yes their could be an overpayment.

Remember though the increase will be pro rata til end of tax year. Will you still be that much over?

This is why we switched to UC as not only were we better off by £300 per month due to the 85% childcare and housing costs included in entitlement but it also reduced the worry of overpayments.

When I finally get the job I want that will be almost a third extra salary we’ll just come off universal credit and no worry of an overpayment.

[unmarkedbythat]

Tax credits are calculated annually.

THESE FIGURES ARE NOT ACCURATE and I am just using them as an example.

Income 25k, TC award 5k
Income 30k, TC award 3k
Income 35k, TC award 1k
Income 40k, TC award 0 (AGAIN THESE ARE NOT ACCURATE FIGURES I HAVE MADE THEM UP)

Say your annual income is 25k and that entitles you to an annual award of £5k, paid at £416 a month. Exactly half way through the tax year, you get a job paying £55k. Your total annual income in the tax year would be £40k, so your total tax credit entitlement for the year would be zero. But for six months of the year, you were being paid tax credits for a household on a 25k income, and now you have to pay it back.

This was probably the worst thing about the TC system!

[Strawberryplum]

I ignored my bill I had from the inland revenue I got about five years ago. I recently received a letter out the blue they were taking money out my wages every month. Quickly got on the phone and arranged a payment plan with them instead of taking from wages. Don’t ignore as they will catch up with you. Shower of bloody shits!!!

[ForeverBubblegum]

At the end of the year they add up all your earnings (so old wage at beginning + period of unemployment p+ 5 months at new wage), take off a small disregard, then work out what you should have got. If this is less then you have received so far then you will own them the difference.

It would have to be quite a big rise in income to offset the unemployment, but possible as you are both earning more now. Can you work out what your income will be for the full year, then put that into a benefit calculator (turn to us). Look at what it calculates for the full year (not weekly) then compare that to what you have received so far.

[Legallyblondeee]

I would post this on the consumer action group forum under the HMRC threads. You will find people there that actually work for HMRC although incognito. They are unbiased and their advice is spot on. I found them very useful when I found myself in a similar pickle a few years ago!

[Squidpinky]

I just dont understand how they are allowed to get away with it - unmarkedbythat explains it perfectly actually the situaiton we are in. Is there literally no way to argue this? If we do a repayment of £100 a month depending on how much it is say £1200 that will take us a year to pay off and we will be £100 down a month which defeats the object of getting a higher paid job!

[BooseysMom]

Tax credits are a shiny shower of shit.

Amen to that

[mike3]

The amount you owe won't make you worse off than the increase in post tax salary, so the object of the higher paid job is not defeated.

[Florencex]

Had to vote YABU as tax credits are based on annual income. If your annual income is higher than you had expected then yes you will need to pay back overpayments. It may not be the whole amount from April to October, it may just be a portion of it, that would depend on the exact figures involved.

It is obviously not your fault that this has happened, but it is what it is, you cannot keep amounts that you are not entitled too.

[Enoughnowstop]

Wait until it’s calculated and see how much it is. Thousands could be far less once finalised. Your local CAB would help you negotiate a fair pay back system that has as little impact as possible.

[TiersTiersTiers]

Awards are calculated annually. If income is lower than assumed by Tax credits for the year then they will owe you, if your household income is higher for the year then you will owe them money back.

[SpringSunshineandTulips]

We had a repayment a while back so agreed on £50 a month and received £0. They then decided we are allowed £100 a month So they pay us that now but we are still paying them back £50. I was going to ring them and ask them to just pay us £50 but decided that it would be too complicated for them and couldn’t be bothered with the endless paperwork and phone calls etc so have just carried on their way. I don’t get them at all.

[PlanDeRaccordement]

It doesn’t matter why or how, if you owe taxes you have to pay them. The only thing you get for it not being your fault is to not be assessed penalties in addition to what you owe. You can’t argue away a tax bill if that is what you owe.

[Z0rr0]

This might help, but no way out of paying.
www.stepchange.org/debt-info/tax-credit-overpayments.aspx

[unmarkedbythat]

It's been a good few years now since I did welfare advice, my knowledge is well out of date and shouldn't be relied on, but when I did- it was standard for HMRC to accept any repayment offer that meant the debt would be cleared in a year without asking for further information or trying to get it paid quicker. A repayment plan that would last between 1 and 10 years they could also accept with a bit of questioning about your income and outgoings, you wouldn't generally need to provide full details of outgoings but to give them a general idea. Anything over 10 years, or anything that mean you'd pay less than £10 a month, they would need to get a lot more information from you.

They generally start with a letter saying "you owe us X amount pay it all NOW" but they will agree to a payment plan.

[Desmondo2016]

Have you told them his new annual salary as opposed to what he will actually earn between starting his new job and 31/03/21. Just wondering if that will balance out when you do your annual review next year and tell them what your actual income was for this year. It seems dreadfully unfair otherwise

[HelloDaisy]

Similar situation happened with us except ours was due to the man on the telephone ticking the wrong box when I rang in with our change. Apparently I should have known he had ticked the wrong box and told him!

Anyway, we had to pay it back over a few years on a no interest payment plan so I didn’t really notice it going out.