Tax credit confusion - hours worked?

[mamas12]

Can anyone clarify, I am going around in circles and have lost the will to live trying to make sense of it all.

I work for myself, so am employed by my company. Don't make a lot of money, in fact if I take home £800 in one month I'm rolling in it!

I receive tax credits and child tax credits based on the figure above and I'm very grateful for it.

But, someone has now frightened me into thinking I might be getting money that I'm not entitled to by saying that I should state how many hours I work each week/month as if I put down 16 -20 hours the hourly rate would be different than if I put down 24 - 30.

Now my hours are not fixed so one week I'll work four days and another it'll be different.

Would it be such a difference in what I receive between these hours? Surely the credits people can see that by what I bring home it's a pittance.
Confused.

It can affect your tax credits. I think the main one would be whether you are entitled to working tax credits or not.

II think that the thresholds for that are 16hrs if you are single or 30hrs if you are a couple. As a result your changing between the 2 brackets you odescribe should affect it.

DH is self employed and I'm on a zero hours contract, we write down the hours we work each week and what we earn and ring them up about once a month with our average/week for the last month or two if that makes sense? They adjust it as we go along so there's no big adjustments to make like repayments

I am single and to date I have been entitled to working tax credits.

I'm still confused, halloweeny do you really phone them up every month!
So if you work 16 hours one week and then 30 the next what do you actually get?

I'm trying to see if if I need to apy any money back you see.

I averaged my hours out over the whole year. Recently DD started school, so I rang them and upped my hours to 30pw and got more money from them. (Im a single parent)

If you earn £800 a month then you could give yourself an hourly rate of say £10, this would equate to 80 hours a month so approximately 20 hours a week. Whether or not you actually work those hours doesn't matter too much, as long as you are employed for those hours.

How many hours did you tell HMRC you are working?

Thats just it you see I can't remember what hours I initially said and as I renew over the phone the only change I tell them is what's on my P45 every year. It could be 24 though.
My friend has just scared me into thinking I may owe loads.

What would be the difference between £10 an hour and anything else.

Why does this happen!!

Does it matter if I work more than 24 hours a week for the same pay?

The £10 per hour was just an example, you can give yourself whatever hourly rate you want.

Tbh I really wouldn't worry about it, HMRC are more interested in the amount you earn rather than the number of hours. If your pay was different every month because of the varying hours then it would be a problem, but as it is you are effectively doing unpaid overtime which probably wouldn't affect the tax credits anyway.

Phew baaabaa thanks for reassuring me, that
's what I would have thought. I get paid the same every month but do different hours so it doesn't matter does it.

"halloweeny do you really phone them up every month!"

we end up better off that way if, say, our annual average ends up slightly short of the threashold, but for a few consequitive months it was over, then they take a date when it changed as a change of circumstances IYKWIM and instead of considering us under for the whole year they consider us over it for half the year.. like if you changed jobs

• that's how they've done it in the past anyway

I don't think you will owe anything, but you might be owed some if you consistently work 30 hours a week or more as you get an additional amount of WTC for going over that threshold.

lubey - Do you mean if I work over 30 our a week for the same money ie £800pm?

Halloweeny - I see what you mean

Yes mamas that's exactly it

I am self employed as well and although things vary a bit I'm usually over the 30 hours. Some weeks might be 36 hours, others 28, but it all evens out and I don't usually end up with anything extra earnings wise for the extra hours put in. But there is a premium earnt from WTC.

Yup. In Simple terms they use the amount of hours worked to give you tax credits (so the more hours you work the more you get - although it is done in blocks not individual hours. 16hr and 30hr are the key thresholds).

Then they use the amount you earn to deduct from your tax credits.

So earnings and hours are both important.

I thought a single parent was eligable for WTC at 16hr though not 30 although I know there have been a lot of changes recently so I'm not sure I'm clear any more.

Oh and I disagree with baabaa on the basis that hourly rate is irrelevant.

It is the number of hours that you are actively engaged with your business which is important (effectively because that determines wether they class you as qualifying for working tax credits). This should not be averaged over the whole year if there are significant fluctuations as you may not necessarily be entitled to WTC for the whole year (and you could actually disadvantage yourself by averaging as well as the inland revenue). You should average a 4 week period ideally.

Then they are interested in the TOTAL you earn in the tax year. Averaging this is fine as the assessment at the end of the last year doesn't take into account any fluctuations just the total.

oh haunted - I''m back to being confused again!

If my salary is the same this year but my hours have increased what happens? It's my own business although employed.

So if my earnings at the end of the year are the same as last year but hours have changed that doesn't matter?

I recently rang WTC and upped my hours from 24 to 30 a week, and got paid an extra £15 pw in WTC. They want the average hours per week based on what you work over a year, including allowing for school holidays etc. You also include all hours worked for your business, including admin etc that you are not paid for. I based my profit on last years accounts, plus allowing extra as my business is slowly growing.

It is always better to err on the side of caution so that you dont get overpaid and have to repay it. Its always better to get a lump sum at the end of the year if you have been underpaid :-)

thanks skye
That's exactly why Im concerned here.
Cand I be cheek and ask if you pay yourself the same as me £800pm?

Could you go on the tax credits calculator and put in both scenarios and see what it come out as?

Well I have and it does look as though I am doing the right thing getting what entitled to.
But a friend has said that it's down to how many hours worked my money has gone up because I worked more go figure!

I pay myself £500 pm at the moment, but WTC is based on your next profit. Unless you are a Limited Company and then it is based on your salary but only if you have a contract (see below). My point being that if you are paid NMW, then your salary must equate to your hours, ie £800 works out at 29.76 hours per week at £6.19ph, so I would say that you could easily say that you work 30 hours a week. Obviously the less you earn, the more tax credits you will get.

WTC are very good with hypothetical questions. i rang them and asked what I would get if I earned £7K, 8K, 10K. They were very helpful.

TAKEN FROM DIRECT.GOV Company directors
If you are a company director you are an ?office holder? in law. You are not entitled to receive the National Minimum Wage for the work you do as an office holder. If you also have an employment contract or worker?s contract you will be entitled to the National Minimum Wage for the work you do under that contract. If you are not sure whether this applies to you, you should seek independent legal advice.

OK. The first thing they do at tax credits is work out which blocks of money they are going to give you. Lets assume you have 1 child over 1, you are a single parent and you earn £6400 per year. Figures are approximate.

You may get:
They will give you the family element (£600).
Child element (£2700)
Working tax credit (16hrs) (£5,000).

So the maximum they will give you is £8,300. But then once they have added all the stuff together they look at your income and deduct an amount based on your earnings. So you may actually only get £5000 (this is based on me plugging in the above figures with £90 per week childcare)..

If you tell them that you are working 30hrs then you will get more working tax credit...so you end up with a bigger figure before they start taking off your income. In this case you now get £5300 at the end of the day. Not a huge difference but still a difference.

Upshot....hours are as important as earnings, but hours should be current, and I think you should notify them of any change you expect to last 4 weeks or more. You should NOT average your hours over the year (although it is acceptable to average over a shorter period). Earnings is the TOTAL for the year.

hi I'm not sure if any one can help.. iv never claimed working tax credits before until I had my little girl.. so not entirely sure how it works but looking for advice.. I have received a letter today saying they need to assess my claim due to it being calculated to working 13hrs a week year to date and not 16hr... and now I am panicking and can't call them until Monday... I do actually work 16hrs or a little over.. but had to take a couple of days off and finish early due to taking my dad to chemo.. then in October he Lost his battle to cancer... a week later I had appendicitis and had to have my appendix out. 2 weeks later my mum got arrested on suspicion of murder of her mum. my nan. (they got it all wrong by the way) the home neglected my nan.. however I ended up with 6weeks off of work due to everything... so they have rounded all of my hours out to 13hours...

what will happen? as I can't log on line either and worried there going to stop everything. my daughter is in nursery so if I don't have funds she can't go.

please help and give me peace of mind..

many thanks x

I think if you were off sick and receiving sick pay then you are still considered as working for that time. Hours must average 16. if you get an unpaid lunch break at work then you cannot count that hour into the 16. they are very strict that you must average 16 hours or over each week. If you have a term time job then I think they look at average hours over term time as they know there is nothing you can do about
having to take school holidays off.

thank you. I didn't receive any sick pay due to how long I was with the company for x