tax credit cock up (by me)

[pimmo]

Hi
I have joined because I am v v concerned about our tax credits. My OH filled out the form last time and he put down our income as 13K in April 2012 (which it was as he was a FT PhD student and I was PT working 18 hours).

But 1 month after that he got a really good job paying 31 K (so it was worth the phd scimping years!) but he/we did not tell HMRC to say our income had risen.

I think we should have, but he says that our tax credit payments are based on the previous year, so we simply put down what our income is now on the new form that has just arrived (45 K now) and our TC will go down to where they should be.

But I am worried that they will read this and think ?hang on, they never told us this!? and we will get fined/prosecuted all sorts of horrible things.

But then I can?t bring myself to phone them as I am really scared they will think we are benefit cheats who didn?t tell them the truth?

So are TC worked out based on the previous year?s income (this was low) or is it a combination of both???? What should I do and how can I word things so they won?t fine us.

Although our income is now good, we have huge debts to pay and are only just keeping above water.

They are based on previous year but you are supposed to inform them of any changes so they do an in year assessment. With his income being so much higher I doubt you will be eligible for any tax credits (i think 24k is the cut off) and its likely you will have to repay what you claimed since his pay rise. I would call them straight away and just explain that you didn't realise and try to come to some arrangement.

If my Dp gets the job he's being interviewed for tomorrow we'll go just above the cut off and I expect to lose all tax credits. In reality this will make us about £150 worse off but we'll declare it straight away rather than risk an overpayment.

I just don't get how they calculate it...

If someone applies for TCs in April and their income is 1 million pounds, the TC form does NOT ask for this, it asks for the previous year's income, which lets say was 1 pound... hence the imaginary couple would get TCs for the coming year.
But then they tell HMRC that they are now millionaires and the TCs stop
That isn't right???

But that means that for the year they were destitute they don't get anything because in the year they applied they were doing ok... but isn't that unfair??

I think somewhere among the forms it says that you need to inform them of any changes. In our case we wouldn't have got anything based on previous years income but in last year I was on maternity leave then went part time so we phoned and asked them to do a 'real time' assesment and we became eligible. They have to base it on previous years I guess because any current year information is estimated. I think most peoples income doesn't rise and fall that mush year in year out. In your example they would call in the year they had low income and get assessed based on predicted income for that year.

You can update them. We've just applied off last years income of £21k and have now notified them that this years will be approx £28k , they then pay us as if we have the higher one.

I'm in a similar position op . My dh started a new job in February and I just realised about 3 weeks ago I hadn't told tax credits . I decided just to wait until my renewal came in now since it will be due ^in soon anyway , and his income has only risen about 3-4k anyway .

Sorry to thread-crash but does anyone know if going down to SMP changes your award ?

We've had this as well - dh works for a company but is also self employed on the farm so has 2 incomes to declare.

Sods law being as it is, with some compensation payments for the cattle, the farm has made a profit and dh has actually made some se money Its adding just short of £9000 to his total income on paper (I say on paper because its already been ploughed back into the farm so we won't actually see any benefit iyswim kisses new car goodbye

Anyway I spoke to tax credits and they told me that last year 2012/13 they would discount the first £10k of a wage rise but anything over that would result in tc being repaid. (This year the discount is only £5k)

So afaics your income will be treated as the diifference between what you stated at the start of the year and your dh's salary minus £10 if that makes sense?

So they will ask you to repay the tax credit repay for about £8ks worth. I have no idea what that will be though.

They won't shout at you and its better for you to go to them and say you've made a mistake. They will expect the overpayment to be paid back but this will be done through a deduction of this years award so your monthly amount will be smaller. They aren't allowed to take more than you can cope with though.

Hope some of that made sense - it sounded better in my head

Thanks all.

I was thinking of just submitting the form with our new larger income and letting them sort it out...

For the year they were destitute they weren't claiming so obviously they couldn't get it? Not sure I understand your point.

Phone up ASAP you will probably have to pay it back but I don't think you'll be fined if you contact them. Also if you have debts you will probably be able to sort out a repayment schedule.

If you don't tell them that your income has gone up during the year then you risk being overpaid and having to repay them. That is the worst that will happen. You won't be fined. Whojamaflip is right that last year the first 10K of any increase in income is ignored, so you will have been overpaid based on the 8K's difference between 23K and 31K.

Depending on how much tax credits you are entitled to then the most this will be is 3280. If you are still entitled to tax credits then this will probably be clawed back from future payments. If your income has taken you out of tax credits eligibility (there is no set limit, it will depend on your circumstances such as how many children you have) then you will be asked to pay it back and will have to negotiate a repayment schedule with them.

Tax credits are baffling. We stopped getting them in 2011 when they moved the thresholds but I have just done the calculator and it suggests we are entitled to some but our household income is about 44 grand so I don't see how! We do have two kids now and pay for childcare but I thought if you earned more than 32K you didn't get anything?

Agree that you should tell them, having to pay back overpayment could end up costing you if the terms are not very lenient.

Going to phone them soon and explain. I think TCs are a good idea for people who are struggling, but boy they are complicated and frustrating too. We didn't claim in the first year of our reduced income (about 4 years ago) cos we thougth we couldn't as the year before our income was reasonable. So the thoguht of now realising we may have claimed too much is really worrying... thanks for the advice