Debts, benefits and extra money

[SolidGoldBrass]

I am working poor ie I work but don't earn much. I get tax credits and housing benefit. I also have debts and am on a debt management plan.

WIth any luck I will be getting a chunk of extra money in a couple of months' time. This is a one-off chunk, not an ongoing increase in income. Do I just pay a chunk of the debt off with it, or declare it and have my tax credits reduced, or what?
I want to avoid a) leaving yself short and b) getting into trouble.

Is the extra money a gift? Taxable earnings? Cash in hand?

Earnings. (It's royalties from a book, but I don't know how much it will be. QUite possibly only about £300 anyway.)

I doubt a sum that small would affect your Tax Credit award. Will it take your low earnings over the personal allowance threshold for tax? Well done publishing a book anyway :)

No, it shouldn't do. But there is a possibility of it being a bigger chunk (Amazon ratings are totally incomprehensible to anyone but Amazon but there is a possibility of it having sold more than expected) - so if it's £2k or something that's enough to boost my 'annual income' a bit.

As a rule, declare your earnings. If it means some income tax is due, pay the income tax. If you have debt, always pay the debt off first. Unlike some other benefits, tax credits are based on your income, not your assets or savings. If your gross income goes up significantly it might affect your tax credit award but if you pay off debts with that income you won't be accused of 'deprivation of assets'.

Thanks, that's exactly what I meant - I just needed to be sure that paying off the debt wouldn't be seen as me still 'having' the money and therefore having benefits cut or whatever.