Are tax credits based on current years income or previous years income?

[jampot]

We have only ever had the basic tax credits (£9 per week) but someone has suggested that because dh left work last August and started a new lower paid job in January this may affect tax credits. |Will they take last years income into account or his current salary?

Your tax credit award is based on your current income. If you should have got more last year (before April) then they will pay it to you after you submit comfirmation of last years earnings(not sure if in lump sum or installments), they will then base this current years payments on his expected earnings for this year April 07 to march 08. Worth ringing them to sort it all out but htey may busy at the moment.

I thought it was the other way around, they pay you based on earnings from previous year as thye expect you to earn the same.
I stopped being paid last august and called them, and it made no difference to my payments at all, but they said it will affect my pay this year as the estimate will be lower.

Hmmmm but I think if there is a significant and permanent change they should adjust it. I'm not sure I've just always argued my point...........but my estimates have always been very accurate etc

It is based on this year. We started claiming when I left work, and based on the previous year we would have got nothing, but I explained the situation and we were paid on the estimate, which we then confirmed at the end of the year.

When you tell them what was on this p60 then will then estimate your payments from that, unless you tell them your estimate of what you think hes going to earn between now and april 2008.

Well in that case dropping my entire wage either made no difference or the guy I spoke to was a complete monkey...hmmm...tough choice!

Chirpy girl you may get an underpayment when you give them the details off your p60...nice amount in the bank Just make sure this years estimate is a bit more than what you expect so they dont overpay you

It's like a combination really (the most stupid system possible IMO). They pay you based on the previous years income, but then attempt to adjust it in the course of the year to take account of your current income. A recipe for a great deal of confusion if you ask me.

Fingers crossed...but I won't hold my breath!

jampot - have just been talking too them as our income will be a lot lower this year (as I'll be off on mat leave for 6 months) than it was last year, and they said that they'd do it on this year's estimated income. So I think if you explain you've had a dramatic change in circumstances the same should apply to you.

Will email you soon btw if you want to get together sometime.

definitely lunarsea

hows the boys?

Whenever I get a payrise I ring them up & get an amended tax credit award through. I think they do initially base it on last yrs earnings, but if you earn more then you end up having to pay it back through having less tax credits in the next year.

Not read all the posts.

The tax credit award for 2007/08 is based on your income in 2007/08. BUT until you have actually earnt that money you don't know exactly how much that will be, so it is actually based upon an estimate, which in turn is based on your previous years income. When you send them the details from your P60 in May/June 2008 they will 'finalise' the award and make any adjustments that are necessary due to any differences between the estimate and actual earnings. If your earnings are expected to be different from previous years you need to tell them that.

I have had mine adjusted 3 times this year as I started maternity leave, took unpaid maternity leave & went back part time. I need to ring them again as I have increased my hours. For some strange reason they have always wanted my estimate for the whole year rather than a monthly or weekly amount which can be a pain to work out but it is worth it to get an accurate award and not get paid the wrong amount. In fact I always overestimate my earnings by 10% to account for my pay rise, variable end of year bonus and the fact that DP is self employed and therefore has variable income. I always ring them in April to tell them my 'new' income so we don't get overpaid. We have been stung by a huge overpayment and I don't want that to happen again.

In short - you should notify them whenever there are any significant changes in income at the time - you don't need to wait for the new tax year. You may be entitled to more tax credits but more importantly IMO you don't want to be stung for an overpayment.