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?

[m0therofdragons]

Did you tell them you dh lost his job or just that he had a new one? You’re supposed to tell them every change. That said they regularly messed ours up as we were only entitled for one year then I completed the forms and they kept paying! It was £30 a month but dh and I were on about £80k between us. I kept calling them and they said to complete the form and it’ll sort itself. We own £890 when they finally realised. It was bonkers but I’d put the pay to one side knowing it was too much.

[Devlesko]

Yes, it's always been like this.
It's even tougher if you are self employed or small business as you have to estimate.
We had an overpayment of 5k one year.
You can ask that they only take 40% off your monthly entitlement.

[user27378]

We had this. We are slowly paying back 7 THOUSAND pound. We continued to be paid a reduced rate after we told them about our change in circumstances, and was lead to believe because our entitlement was based on last year's earnings we were owed it. We questioned this several times. I even claimed NHS dental treatment because I was still in receipt of tax credits, but ended up with multiple fines. Only saving grace is, the debt doesn't effect our credit rating and we can pay it back slowly. I think we pay £40 a month.

[yumscrumfatbum]

This happened to us too. I am self employed so had to do a "guesstimation". We found the letters and calculations really confusing when they told us what we owed. After a drawn out wraggling session we set up a payment plan over 12 months to pay it back. Just when we'd finished that we received a bill for overpayment of child benefit. We didn't know my husband had earnt more than the threshold just for that one year but ignorance is no defence in the eyes of the law. Again a payment plan this one over 18 months and completed this summer.

[LakieLady]

@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?

All tax credit awards are provisional, based on your estimate of your income for the forthcoming year, and assessed over a full tax year.

You can be entitled to TCs for months, then get a big pay rise that wipes out your entitlement for the whole year. The TC money you had before you got the pay rise will then have been overpaid.

I miss tax credits, not that I ever got them. I'm a benefit adviser, and much prefer a TC problem to a UC problem. TCs are logical and consistent, unlike the world of lost vagueness that is UC, where the word "may" is used in guidance and decision makers seem to have an awful lot of discretion.

[MayDayHelp]

I moved in with my ex, very long story but it was a fucking disaster and I moved out again less than 2 months later. I had been 💯 honest with TC, about the exact dates I moved in and out, told them immediately when my dd started childcare, and my ex started a new job. They still said we owed them over £1500 when I moved out and went back to a single claim. That was pretty much all the money they had paid us on the joint claim. Still no idea how on earth that happened.

[Dcadmam001]

Have you told them his full annual salary - if so you need to amend it to total he will get between when job starts to end of tax year......

[MsMarple]

I got a letter saying I would owe thousands, based on my new job.
When I looked at their calculations they assumed I will get my entire salary this tax year, when actually I will only get half of it. I am hoping that my p60 in April will show the right amount and they will recalculate based on what I actually received...

[SerendipityJane]

I just dont understand how they are allowed to get away with it

Because it's never bothered anybody that matters ?

[lockdownalli]

I had all this after getting a much better job mid tax year.

I called them and arranged a three year payment plan So I pay about £32 a month which should actually finish soon. They will ask you what the amount is you can afford to pay and work it out from that - no interest payable.

Good luck

[Smallsteps88]

It’s such a stupid system. I gave up trying to works out how much to expect from tax credits or how much they’d decide I owed years ago. They pulled figures out of their arse. I moved from WTC to UC in April and it’s such an easier system to work out. I don’t know why tax credits used such an awful way to work it out leaving people owing thousands every year. So inefficient.

[Mumoftwo12345]

It's happened to us too. We agreed a payment plan. It's a mess and I hope to god we never have to use them again.

[Babyroobs]

It's calculated over the year so yes if they estimate that you have been paid too much you will need to pay back what you have been paid. they should let you pay it back gradually though.

[Babyroobs]

@Smallsteps88

It’s such a stupid system. I gave up trying to works out how much to expect from tax credits or how much they’d decide I owed years ago. They pulled figures out of their arse. I moved from WTC to UC in April and it’s such an easier system to work out. I don’t know why tax credits used such an awful way to work it out leaving people owing thousands every year. So inefficient.

This is why UC is better in some respects. It's based on real time information rather than annually so overpayments are much less common.

[Pourmeawine23]

Tax credits is not a benefit therefore it’s not based on your weekly/monthly wage. It’s a credit on top of your annual income. It will be based on your p60 figures come the end of the tax year. They aren’t “getting away with it”. This is how the system was designed. It wouldn’t be fair for you and your husband to receive and keep the amount you have already have when his annual wage has increased.

[ExclamationPerfume]

It's always been based on your total income for the tax year April-March. They are good at allowing payment plans.

[RaspberryHartleys]

This is right - it's how it was meant to be as it works on yearly pay. So from April 20-April 21, you need to work out what your household income be will be. If you earn over the threshold, then you aren't entitled to tax credits for the Apr 20-Apr 21 tax year. So anything you were paid in that tax year needs to be repaid.

Sorry it's not the answer you want OP but you're not actually losing any money and you had the tax credits when you needed them the most. Now your family is in a better position, you need to pay back anything that was over the threshold.

Seems fair to me?

[Flavabobble]

If there's a pension scheme, see if you can make a few AVCs (additional voluntary contributions) those would be disregarded under income for tax credits. It would leave you with less money now (but from what you say you're much better off) but not owe loads back to tax credits. And have some money in your pension. Plus pay less tax.

Use the entitledto website to get a rough idea.
For example, if you earned 50k in a year, putting 27k into AVCs means your tax credits are calculated on an income of 23k. And that the tax is only paid on 23k.

[Dishwashersaurous]

Another voice saying that it’s an annual payment.

But speak to HMRc about a payment plan and how quickly you have to pay it back

[Dishwashersaurous]

And actually this is an example of the system working.

You were given money when you really really needed it.

Now your situation has improved so you pay it back.

It’s like an interest free loan

[NameChangerinDespair]

This just the sort of thing your MP/their Caseworker can help with. HMRC tend to pay more attention when an MP takes up a case and there are dedicated hotline only they/their Staff can use.

[ChilledTomotoes]

We had the opposite problem....my DH lost his job in Nov, but his earnings Apr - Nov took us over the threshold so we were entitled to nothing until next April. It was a real struggle and we only got by with help from family.

[Queenie8]

@Squidpinky this happened to us. My OH started a new job in January and took us over the threshold. We owed £2500. It took until August for them to sort out the amount we owed. Low and behold I've had a letter today saying we owe another £257. I queried three times that it was the full and final amount. Yes they said. Ffs 😡

[Babyroobs]

@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.

Yes this happened to us many years ago when our children were small. They sent us numerous brown envelopes demanding we pay back almost £1000 immediately. When I rang them in a distressed state as we just didn't have the money they said we could pay it at £30 a month over 3 years which was manageable.

[Tee22]

Similar thing happened to us. I insisted we were not eligible for the credits but they said we were. So we took the money and spent it. Low and behold a year later we were asked to pay it all back. I paid them back something like £10 per month for years. No way was I giving it all back in one go.