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?

[Fleamaker123]

I would wait to see what the re-calculation will be.

It's usually based on the previous tax year, but you've been honest and told them straight away, so don't see what more you can do.

And then for this tax year April 2020 to April 2021 your husband will only earn 6 months salary.

It's terrifying the way they do it though. My DH is self employed and we always have to estimate. We usually over-estimate so we don't end up overpaying.

[FirstOfficerDouglas]

Same happened to me. But it is fair. You were paid the money - you now have two incomes and a higher earning DH so if you spend the same you should have a lot left over - which you use to pay back the TCs.

[Fajitanita]

Yep, unfortunately this has been the case for a while and many people have fallen foul to it.

[Batmanandbobbin]

This happened to me when I moved in with my partner and came off them. I’ve been paying it back for 2 years and another 2 to go. I pay £50 a month and they calculated I owed them £2468 god knows how I moved in with him in July so I got paid less than that off them in the April - July months.

[PrivateD00r]

OP unfortunately this is correct. The way tax credits work is, you provide them with an estimate of your income for the next tax year, usually based on your previous years income unless you tell them otherwise.

We have just had to pay back an overpayment. Basically I was due a pay rise in April 2019, however negotiations took a long time, in fact the pay rise was only agreed in February 2020 and was significantly more than I could have anticipated. I was then hoping the back pay wouldn't come until April, but unfortunately it was paid in March 2020. This meant that the pay I received in that tax year was significantly higher than I had anticipated, meaning I owed them back around £500. It was frustrating as I couldn't have predicted such a large pay rise, it came about due to a legal challenge around pay parity.

We have had it previously too in a situation very similar to yours. As a pp suggested though, it is unlikely to be as bad as you think. You have probably told them your DH income is say 25k a year, when actually in this tax year, it will be half that. So you may not owe back as much as you fear. They won't look at it until after the close of the current tax year, when they can assess your actual income. At least you know and can start saving a bit each month towards it.

[LadyFlumpalot]

I had an overpayment of 3k, kind of my own fault (my mum died in the middle of a load of life upheaval and I just plain forgot to tell them some stuff) so I phoned to arrange a payment plan.

The cheeky shite on the phone said that a debt to HMRC was very serious and I could be in big trouble, rather than arrange a payment plan they would prefer me to take out a bank loan to pay it all off. When I refused to do that they told me I needed to ask a family member or friend to loan me the money instead!

Obviously I told him to jog on (politely) but I did end up complaining, just think if they said that to a vulnerable person, they could make things so much worse for that person. !

[LadyFlumpalot]

Oh yes, and even though I finished paying it all back last year AND said I wished to be taken out of the system, I had another letter in June this year saying I owe ANOTHER £170. Apparently they made two erroneous payments back in 2016 that they've just found out about.

[hennaoj]

If your income for current year has gone up by more than the disregard (£2,500) then the award is based on the current years income minus the disregard. Sounds like your income might have gone over the disregard. Make sure you tell them about any personal pension contributions.
Gross pension contributions are deducted from pay before calculating earnings for the purposes of tax credits.

[Deargreenplace]

Squidpinky its an awful situation but I think you will have to pay back your entire years' worth of tax credits as other have said. We just paid back over £3000 pounds despite living on one minimum wage for months and rinsing our savings, collectively we still earned too much last tax year. I naively thought our tax credits would stop from when our income changed for the better and I updated them. Didn't realise we'd have to pay back what we had received during the super skint months too. That money was long gone.

I'm sure they will let you pay the overpayment back slowly. Ultimately it will be worth it with your husband's new job if you're eventually free from the stress of the Tax Credits system. I absolutely hate it. Total incomprehensible letters too.

[AndWhat]

We had this and have posted before. They won’t tell you how much you owe till after April once your earnings for year 20/21 are final.
You can then agree a payment plan with them but they can only spread the payments over a short time period. They do have a ‘debt team’ who can spread your payments over however long we agreed £25 a month at the beginning as it was all we could afford but we’ve never increased it as it doesn’t show on any credit reports and they’ve never asked for more. I think we’ll have paid it off over a 10 year period.
Absolutely shit system!

[Sunnydaysstillhere]

Ime ignore the letter. Then the overpayment dept will write to you. They have much more insight and are happy to agree a lower repayment amount - they have more clout to make such decisions!! They may even give you a different amount altogether to repay! Also they may recalculate based on your new circumstances and you may still get some... When we married I was overpaid. Have repaid a tenner a month for the past 5 years!

[Nicelunch25]

I was overpaid by tax credits and didn't end up having to pay it back as it was their error. The thing I would say to you most is to write letters to them and keep records of what you've sent as (in my experience) they make mistakes so if you do it by letter, chances are, they will make a mistake and you won't have to repay.

[Legseleven1990]

This happened to us as well. I was working full time until September, and we got tax credits towards childcare. Even with the contributions, my wage + tax credit childcare element was only breaking even with our childcare bill, so I swapped to a part time job working evening instead, so we had no childcare costs. The next year we were told we owed back everything that had been paid towards childcare until September, even though we had been using it for childcare at the time we claimed it (we obviously updated them when this was no longer the case and we stopped receiving the childcare element) but they said it didn't balance out over the year so needed to be paid back. So I still made no money after childcare for the next 9 months because my wages went to paying back the previous years completely legitimate contributions so I would have been safer staying working full time and bringing home no money but at least having evenings together as a family. If I had swapped jobs in April it would have been completely unaffected. I guess that's why they've changed the way things are assessed with Universal credit (although its still riddled with flaws).

[PigletJohn]

@BooseysMom

Tax credits are a shiny shower of shit.

Amen to that

the rules they are obliged to follow are laid down by the government.

The popular press likes to divert criticism to the workers and away from the bosses.

[Wetweekend99]

We've had no end of trouble with tax credits. We now pay back £30 a month for many years to cover an over payment. I had a letter about an over payment from 2018 the other day! I don't even claim it any more, more trouble than its worth. Just ask to pay the least amount each month.

[Lovemusic33]

Op is saying that her dh hasn’t started the new job yet (or has just started)? Tax credits are based on previous year earning so I can’t see how they can owe money for a change that hasn’t happened yet?

I would be questioning this, it sounds like a mistake.

Tax credits are a bunch of w@#kers, I’m currently fighting a £5000 bill for money owed from 5 years ago when my abusive ex stayed here for ten months, I gave them all his details when he moved in but apparently there was a mistake in his earnings, I can’t prove anything because I haven’t seen him for years and I have no contact details for him. I have refused to pay it and so far they have not taken any money from me, they just occasionally send me a letter asking me to call the debt team.

[Di11y]

It'll be based on your average for the year. If 1 FT income for 6 months plus his new job and your new job for 6 months is more than your combined salary you were expecting then you'll have to repay.

[Quacks2020]

This happened to my sister. We were completely shocked.
Say she rang them in November to tell them of her changes, she had to then pay back that whole year. Where as if she would have waited till January. She wouldn't have.
Gobsmacked wasn't the word. Try and be decent and they screw you over.

[ExclamationPerfume]

@Quacks2020 it's from April - April so she still would have had to pay them back. It's always been that way.

[Babyroobs]

@Quacks2020

This happened to my sister. We were completely shocked.
Say she rang them in November to tell them of her changes, she had to then pay back that whole year. Where as if she would have waited till January. She wouldn't have.
Gobsmacked wasn't the word. Try and be decent and they screw you over.

As above she would still have had to pay them back if she earned too much in the tax year.

[mummyplusbump]

My experience of tax credits is that I changed jobs at the end of last year and the overlap where I got paid for PILON for the old job and then the first months salary for the new job pushed me over the threshold for tax credits meaning everything I had received needed to be paid back. I received a letter yesterday to say I have to pay £1740 by next month although I can apparently pay in instalments. I had let them know and cancelled them anyway (due to moving to tax free childcare with the new job).

[mummyplusbump]

Just realised what my username is, the bump is 5 and a half now 😂

[Fotallytucked]

I feel your pain ! I was in a similar situation a couple of years ago and was told to suck it up.

April - September I worked partner was sahd

October we split .

I made a single claim and he moved out

He got a job October to april (gave me nothing)

October to april I went part time told them every month what I was earning they even sent me a couple if extra £ one month for a reclaculation which I called and questioned

Then i get an over payment notice for my joint claim as that he earned was pro rata over the year and i had to pay back hundreds even though i never saw the money .

No amount of complaining and crying helped I was just told tough.

The system is stacked against those that work.

[AibuTellMe]

Its calculated annually surely you know that OP if you had to renew every year

[TheTrollFairy]

I’m not sure but I absolutely think that benefits do keep people in a shit situation. I watched a channel 4 things on benefits and the one that sticks in my mind was a woman who went on benefits when she quit her job to spend time with her dying daughter. Her daughter died and the woman went back to work but could only afford to work under 16 hours as if she goes above 16 hours then here benefits are sanctioned and she can’t afford the stop gap in order to go between sanctioned benefits and earning more