Please read if you want tax credits explained!

[CarrieLouise25]

Hi everyone,

Firstly, I'm not an expert, but I am affected by these changes, and I've done a lot of research into the changes, and I'm hoping to help those who need help.

1. There was a very confusing income threshold reduction from £6420 to £3850.
2. There is also a higher rate per £1 reduction from 41p to 48p.
3. The Basic Family element will disappear.

This is how this works (only for Working Tax Credit). Imagine a 1 parent family with 2 children, working 30 hours a week. Earning £12,000 a year.

Total WTC Basic Element: £1960
Total WTC 30 hours element: £810
Total benefits she could receive = £2770

Now before, the threshold was £6420 and 41p in every £1 reduction over the threshold. So this would be:

£12,000 (wage) - £6420 (threshold) = £5580 x 41p = £2287.80

So total possible WTC = £2770 - £2287.90 = £482.20

So her total WTC = £482.20.

Under new rules, the new threshold is £3850. So the new calculation is:

£12,000 (wage) - £3850 (threshold) = £8150 x 48p = £3912

So under new rules, no working tax credit for this lady. Total loss £482.20

The family element is disappearing, so this is another £545 loss.

With Child Tax Credit, the elements are £2780 per child, so she should still get £5560 for her children.

Old rules:

Wage £12,000
WTC £482.20
CTC £6105

New rules:

Wage £12,000
WTC £0
CTC £5560

Worse off by £1027.20

Hope this is helpful. I'll post some more calculations soon if you like!

floaty, I've just done a manual calculation and it matches up to the Telegraph's calculator I'm afraid.

Elizabeth, do you think these calculators aren't taking into consideration the childcare element of TC? The calculation for this year is coming out at 17500 which is 5,800 short of what my income actually is.

I'm not sure now. There was no mention of a Child Tax Credit income threshold reduction in the budget.
He only made reference to the Working Tax Credit threshold reduction.

Happy, they don't ask about child care costs, so can't be taking it into account. I'm very suspicious that the child care element of working tax credit hasn't been mentioned in the budget, and I'm also wondering if any child care support will be given post-2017 for the third, fourth, etc, children.

The independent calculator says I'll be worse off by £2300 pa. We'll be ducked - single parent, two kids, no maintenance.

I've got family in Ireland - when my marriage ended I decided to stay here for stability for the children, but now I'm not sure. The NHS trained me & I'd feel guilty about working elsewhere, but not to the detriment of my family

Hi Lougle,

As far as I know:

Family element – the basic element for families responsible for one or more children = £545

If anyone is entitled to Child Tax Credit at all (and I think this goes right up to 30k) then the basic element is awarded minimum, and then there are extra elements on top per child if you qualify.

It is an element that will be lost as far as I can see in the budget.

They can't possibly reduce/scrap the childcare element of TC with the cost of childcare for even one child out stripping parents incomes! Then most people with kids, me included, will have to quit work!

Do we think they are going to clarify this at all at some point this year? And by they I mean HMRC. They cant just reduce people's tax credits in April nexr year without warning. You know what renewals are like, you start gettinf lower payments and then your renewal letter explaining why appears 6-8 weeks later!

Can I ask a question.

In our family there is DH, myself and DS (7).

If our household income for LAST year was above the threshold (ie we couldn't claim anything) yet this year, I have been made redundant and DH's wage has dropped thereby theoretically making us now eligible to claim, how does that work? Given that the calculations are based on last years earnings?

Also is there a savings threshold which prevents a claim?

Apologies for typos. Furiously typing and not checking.

So the lady in the OP loses WTC and is £1027 down.
But now, without WTC credit would be entitled to free dentist, school dinners etc. where she wasn't before. ?
I did that calculator and it worked out we'd be about £900 down in our house.
But if we got those benefits you get when you get CTC but not WTC it would make a big difference.

Carrie - it's only scrapped for those starting a family after 2017 though isn't it?

I don't think they're cutting/scrapping it for the magical two first born children, I've just noticed that nothing has been said about what will happen in relation to a third child. I'm hoping that even this shower of shite of a government would be able to see the consequences of scrapping the child care element for subsequent children. If you want parents to work, then it makes absolutely no sense at all.

Shakey, if your income has fallen, meaning that you are eligible for tax credits for the current financial year, you can put a claim in and give them an estimate for this year's income. They will want you to put last year's income on the application form, but then you ring them up a few days later and they will re-calculate it on the estimate that you give them. Get the claim in as soon as you can as they don't backdate it for very long.

Re savings - I don't think actual savings count for tax credits, but you would be asked about any income from the savings, i.e. interest.

Hi SisterMoonshine,

I think you're right. As she gets no WTC now, maybe she could get free dentist, school dinners etc.

I expect the HMRC lines will be jammed with queries...

Hi kappadelta,

Yes, as far as I know, having a third child after April 17, won't get any extra support.

Ive no idea how im going to fare and no idea how to work it out.

I'm starting university in september. Currently i get income support as a lone parent of 2 children, that would be ending in May of next year anyway as youngest turns 7 (i am in NI and it hasnt gone down to age 5 yet here) I have no idea what i will be entitled to from september.

I have a tax credit exemption card for prescriptions/dental work. If income is less than (roughly) 1600 then you will be issued one. It will automatically be sent to you if you qualify.

There seems to be alot that needs claryfying. What an anxious crazy situation to be in. I suppose I will just wait and see what happens when it happens. When is this all set to start?

Thanks Elizabeth

Sorry OddBoots, you were right, the lady will lose her WTC and then can claim free school meals (hopefully!)

My mistake...

Don't be sorry Carrie, I was just wondering - I wonder if that was intended by GO or if it is an unforseen.

It'd be nice if they put that £16000 threshold dor prescriptions etc up by a grand or 2, in line with living wage like.