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!

Cleo29 - Thank you so much for clarifying the position re the income threshold for those claiming Child Tax Credit only. I read everything I could to see if it was also reducing to £3,835 the same as the threshold for Working Tax Credit, but couldn't see anything on it at all. Your explanation has made perfect sense.

So now I'm wondering if the millions of low-paid mums who are only working 16 hours a week because that was the threshold to be able to claim WTC would be better off reducing their hours to 15 hours a week, not claiming WTC, but being able to claim the full amount of CTC instead??

I played around with some figures and perhaps someone else would like to check these for me:

Assume single parent, two children, 16 hours a week, no childcare on £11k.

Current claim 15/16 - WTC 1,960 + 2,010 = 3,970. CTC 545 + 2,780 + 2,780 = 6,105. Reduction due to income 4,580 x 0.41 = 1,877.80 so total payment = £8,197.20

New claim 16/17 Reduction due to income 7,150 x 0.48 = 3,432 so total payment = £6,641 (Loss of £1,556.20)

If works 15 hrs per week and assume for the moment that still earns £11k, she will not be eligible for WTC so will get CTC £6,105 with no reduction due to income.

The £6,105 is £536 less than the £6,641 she gets if she works 16 hours per week. However, because she is a CTC only claimant:

1. Her children can get FSM (£874 for 2 children at £2.30 per meal)
2. The school will get Pupil Premium (£1,870 - £2,600 for 2 children). This money goes to the school who can choose what to spend it on, but many spend it on subsidising trips / music tuition / buying revision books etc for the particular children.
3. The school will get c. £2,000 in "deprivation funding" in their general school budget. (This bit is not directly spent on the DCs, but the school will be delighted.)
4. The mother will get free prescriptions, free eye tests/glasses & free dental treatment. No idea how much this costs on average, but it's got to be a couple of hundred pounds.

Looks to me as if in this situation, the mother would be better off reducing her hours. I thought this Govt wanted to "make work pay"?! Would be very amusing if all the people currently working 16 hrs pw reduced their hours to 15 hrs pw and completely exploded the FSM / Pupil Premium budget!!

Can you run through the protection to the disabled element again please? I have this on my TCs now. I have 1 child of 16 going to do A Levels. Single parent.

I work 24 hours a week in a mixture of employed and self employed roles. Wages p.a. £3800, Self employed 1 £3000 p.a. and Self employed 2 £2400 p.a. (I think that contract will end this year). So can you run me off an estimate with and without that figure based on the disabled element please? I can't find this referred to in any of the calculators. Thanks so much!

Thank you so much CarrieLouise25 sorry that is so helpful I have been in a right state about the changes, thank you thank you thank you

Great name BTW my eldest is a Carrie Louise

Hi Mandy2003

This is how I think it will work for you:

WTC basic element:£1,960
WTC Single Parent element: £2010
WTC disability element:£2,970
CTC Basic £545
CTC Child 1 £2780
Total: £10,265

Take away the threshold @ the old £6420
Income £9,200
Less threshold £6,420
Excess income £2780
X 41% = £1139.80

Your total TC's should currently be: £9125.20

Under new rules:

Income £9,200
Less threshold £3,850
Excess income £5350
X 48% £2568

New TC's could be £7697

Potentially £1428.20 worse off under the Tories.

Hope this helps...

Hi carrielou2007

No worries at all! Glad to help. Love your daughter's name

I called my daughter Chloe Louise, which I love

Thanks so much!

I really don't understand these calculations.

How would I work mine out OP, I do 18.5 hours per week, 12,600 p.a. and no childcare costs but 2 kids under 18.

BBC says I'm 1350 ish worse off.

Oh no, it's £13,500 a year.

I did once try asking the people at the tax credit office how it was all worked out, but got nowhere.

I will be 2300 worse off - and Ive had my award for the current tax year cut by 1600 already.... so over 2 years that's a reduction of nearly 4k... I work 32 hours a week - I physically cannot do any more - single parent with 2 children.......

Oh yes I'd forgotten that we've already had a tax credit cut

I've lost £2000 per year and I'm already paying £80 per week out of my tax credits back to them because they overpaid me by £5000.

It was THERE fault too. Bunch of bellends.

sorry - coming late to this. I'm confused. Can anyone help or explain?

Do the new changes from April 2016 mainly affect WTC, or CTC too? Some material in the press say that it is not clear yet whether the earning threshold around £16,000 or so, to be eligible for CTC, will remain or change. Does the reduction in the earning threshold for WTC (£6K down to £3k) affect CTC?

I'm single parent, part time (above 16hrs), 2 kids at school, earning £20,000 p/a, currently receiving no WTC and £400 p/m CTC. How much will I loose on 1 April?

Am I same as floatyflow?

Hi!

Just wondering if anyone can help?
I have two children aged 5 and 2. Do you know how much child tax I should be getting?

Our income is very low, only my partner works at the moment so we come under the £12,000 a year income.

Thanks in advance!

HI Carrie

thought id give u a quick message for some advice if that's ok?

I'm a single mum of one, working 32 hours a week. my annual salary is £18400 and I pay about £700 childcare a month.

my problem is I'm not eligible for a payrise at work and I'm wondering if its going to adversely affect my tax credits?

any advice you could offer would be greatly appreciated.

Kind regards
Michelle