Tax Credits

[thefutureisours]

Please excuse my ignorance on this as I've never claimed but my mother has just told me that tax credits need to be paid back in full once you are no longer entitled. My understanding was that you only had to pay back any overpayment that had been made to you. Can anyone shed any light on this?

Absolute tosh.

I thought so. I don't know where she had got this information from. My guess is that when she claimed it was short term and she was late in informing about a change in circumstances or something as she is insistent that she had to pay it all back.

If your household income rises significantly during the year to the point where you would no longer be entitled then yes you may have an overpayment. Yes it is possible for someone to have to pay that years tax credits back if their income rose enough.

I think your mum has misunderstood. Yes, if you earn more than expected over a year and fail to keep them in the loop they'll claim it back. But you don't have to pay back the years and years of having small children and a part time job just because they're finally old enough to leave home and you've started earning more because you're no longer wiping up behind them all the time...

If you were earning £20k at the start of the tax year and received tax credits based on that figure and your earnings rose during the year and by the end of the tax year you had earnt 30k and that is over the threshold for your situation then you would have to pay back those tax credits because your income over the tax year was too high to receive them. Hope that makes sense. You ,would not have to pay back for previous tax years. this is why it's important to keep them updated if you have a pay rise mid tax year - sometimes they will stop payments suddenly because they can see that you are going to be over the threshold. This is why the Universal credit system in theory may be better because it works on ' real time' rather than over the whole year, so hopefully will avoid overpayments.