Friends have had their tax credits renewed...

[mama2moo]

They have been ranting on Facebook about how they have had their tax credits reduced and it seems a lot of people have had letters today.

I had extra money from them in my account over the weekend which Im not touching until I have my notice.

Are the reducing lots of peoples even if circumstances havent changed?

IIRC, they have changed the income brackets so a lot of middle earners would have their tax credits reduced.

The thresholds changed back in April and the working time for couples went up but the new criteria were flagged up quite a long way in advance.

Hmm! I got £300 more than I was expecting this month. I don't dare touch it.

Ah, that wouldnt affect me then because Im on my own and dont earn much.

I got a nice bonus but wont touch it either!

Put the money away in an account that earns interest and, once you're satisfied no-one is going to ask for it back, it'll be worth a few quid more than it was originally. Win-win.

The problem with tax credits is that often income changes don't affect your award until a year or more after they've happened because awards are usually based on the previous year's income. Even then you can earn up to 20K more the following year before it affects your award (this has gone down to 10K from this year)

eg. 2010-11 you claim for the first time and earn 18K - your award is based on earning 18K.

2011-12 you earn 28K, but your award will be based on you earning 18K the previous year

2012-13 your award will be based on 28K, so it will appear as though your income has stayed the same but your tax credits will go down massively, not because of changes in income thresholds or rules, but just because of the way tax credits are worked out.

Makes it very difficult for people to know what they're entitled to, and when, as a result of income changes.

That is true iam having the same struggle

Im on ML at the moment, and the advisor told me to calculate our estimated income for the current year and then they can adjust the tax credits for us, our income has also dropped over 10k this current year.
He did say that if we underestimate the amount we will earn then it will affect next years tax credits, meaning we will have a reduced amount to pay back an overpayment, so i did a spot on estimate and added an extra 500 bunker just incase, the amount we will be recieving was more than i expected, however we are not going to be rolling in it this year, it just means we can afford to eat well!