Does a retention payment on top of my salary get taken into account for Tax Credits?

[Findingme123]

Does anyone know if a retention payment (which can be taken away at any time) which is added to my salary should be taken into account when my tax credits are calculated?
The retention payment takes me over the threshold but the additional income does not equal my loss of tax credits so I'm now significantly worse off financially.
Any advice is welcome. Thanks.

When you say taken away at any time presumably you mean it may not be paid every year/month and not that you have to repay it. I think it would count for tax credits as it is payment from an employer and would be the same as a bonus. This is quite annoying for you. Not sure if there is a way round it. As you are supposed to inform them of any change in circumstances or income.

If it is taxable, then yes it is almost certainly counted as income for tax credits. However, tax credits are withdrawn at 41p for every pound you earn before tax - it's a taper (rather than a cliff edge where a pay rise can leave you worse off than before).

If we assume you pay tax at 20% and national insurance at 12% then every extra £1 should leave you 27p better off even allowing for loss of some tax credits. So I'm not sure why you think this retention payment would leave you worse off?

Thanks for the useful information. I'll have to do some calculations and see where I'm at. The payment can be stopped at any time and I think it is taxed (I'll go and check).