Another Tax Credit one...

[Amanduh]

We are helping SIL apply for a mortgage (very limited at using tech and rubbish with money but that’s another matter) and today sat with her to write out an affordability spreadsheet, budget etc etc.
She put down her income as 32k - she has 2 dc (one at school) and she works pt, husband ft. They pay out 50 per week childcare for dc2.
On top of their earnings, she put down extra income as £8000 a year in tax credits. She says she gets paid this on top of her earnings.
This sounds like a lot to me? I have put their details in various calculators and received varying outcomes, but nowhere near that figure. I think perhaps she has filled something in incorrectly somewhere along the line, but she’s adamant that’s correct. Does any one have any general idea if that figure would be about right?

It sounds way too high. On an income of 32k if they had no childcare costs they wouldn't get any tax credits as the threshold is 32k. So according to those figures she is getting all their childcare costs paid ( unlikely ) + an extra 6k on top ?? Or is she including the 8k tax credits in the 32k income?

It sounds completely wrong, yes. Are you sure she isn't including 8k in with the salary, so 32k total? She may also be including child benefit in that but that is not much pa for 2dc, not sure exactly but about 1.5k?

She input her figures as though she is a single mum ie only income ha her part time income.

Trust me, £8k is what I get as a single mum not working

Does she claim dla for one of the children? With disability living allowance you receive an extra £80-100 a week disability credit on top of usual tax credits (we receive this for ds). Our tax credits are £205 a week. We have two dc, dh works full time on £17.5k.

Way too high I think. And I speak as a LP who works part time.

Way way too high. She is going to have a nasty shock when HMRC cross reference with her’s and husband’s P60

Have you managed to find a mortgage lender that will accept tax credits as income still? If so please tell me who it is as well, that would be useful.

Nationwide accept tax credits for mortgage purposes. They also take child benefit and maintenance payments into account.

Yep it’s nationwide. Thanks to all the replies. I am convinced she has either deliberately or accidentally declared the wrong info. No, she hasn’t included that in the 32k - it’s extra income - and no disability etc.

I got a mortgage with nationwide and they ask for your award statement

She’s got the award statement, she’s receiving the money. I just thought that surely there’s no way she’s entitled to that, and now she’ll get a big shock when hmrc realise/find out and she’ll have to pay it back. Oh and she’ll get herself into a mortgage declaring income she shouldn’t have and then struggle to pay it when they stop paying her that amount.. from talking to her further, she’s being very shady about it, I think she’s probably aware that she hasn’t declared her income correctly. Don’t quite know where to go next, could ignore it and let her get on with it but that seems wrong. I’ve never dealt with tax credits so couldn’t be certain what was likely.

Could the £32k be the salary but she's forgotten to pro rata it down for part time?

Unfortunately come renewal time she's going to possibly end up with a huge overpayment which they are likely to take back at 50 % I think.

Does she claim dla for one of the children? With disability living allowance you receive an extra £80-100 a week disability credit on top of usual tax credits.

that's not correct as such. it's all income dependent. we have a child on DLA (HRC) and receive no TC (joint income of £33k).

OP, sounds fishy. Even with having a child in DLA and paying some childcare too we get no tax credits at all (2dc, 33k income). She shouldn't be getting anything.

What income did she declare to Tax credits? certainly not 32k.

If I were her, I'd sort the tax credit mess first before going for a mortgage. sounds like she is being overpaid massively and the hmrc will want that back

Her award statement will say her earnings.

Thanks all. Going to have a chat tomorrow!

The award statement she has will show what earnings they have put down. If the tax credits have made a typo mistake for instance....! We get a joint income of 33k and pay £220 a month in childcare and we don't get that much. We get roughly £140 a month....! Something is definitely wrong. X

She ‘can’t find’ her award statement yes something is definitely wrong, inc child benefit and with her tax credits she is getting around 9k a year on top of their 32k salary combined, which just doesn’t add up.

I feel a bit worried for her. Best case she is going to have a huge overpayment to pay back. They aren't entitled to tc so it isn't like it will be taken out of that they will just have to find the cash. Sometimes they add a fine too of 3k. She may be investigated under caution.

Probably not the best time to be applying for a mortgage. She will need to provide all paperwork to the bank as soon as they read it they will realise the numbers don't add up and possibly even report the benefit fraud, the terms of their job likely means they are bound to report any financial fraud.

Thebank wont give her a mortgage unless she provides the tax credit award.

The bank will surely notice there's an error when they check her award statement. That's a big overpayment she'll have to pay back

I’m telling her all of this but it doesn’t seem to be going in. She is adamant she’ll get a mortgage because her broker has told her to deny she pays any childcare fees to the mortgage provider, and pay them in cash so they don’t show on her bank statements. He’s told her he has no doubts in her getting £155k mortgage, and all she needs to provide is 3 months bank statements.
She is, we have now found out since looking in to all this, very bad with money. I’ve told her we won’t be helping her apply for a mortgage and she needs to stop and sort her finances out first and contact hmrc. She says she won’t as the award is correct.
She’s going to get a very big shock.
Thanks for all the input everyone

she cannot have declared an income of 32k to the hmrc

if the underwriters want to see the tax credit award, it will state on what income it is based and the discrepancy will come out. let her sort it herself.

Won't the lender see the incomings and outgoings when they look at the bank statements? So any untruths or inconsistencies about income, benefits, paid childcare or anything else will be noticed?

I would be wary about a broker who encourages clients to tell untruths. That's how the whole self cert scandal worked. £155k sounds like quite a big multiple whether their income is £32k or £40k too.

To pay her childcare costs in cash is also terrible advice! Always pay electronically with a trail. That way when hmrc check you have told them the correct childcare costs (which they WILL do) you can print out a year/2years of bank statements and it is right there for them to check. It happened to me twice in 12 months so she should be ready for that.

If her childcare costs are actually £50 per week then it shouldn't hugely affect mortgage availability anyway.

It sounds as if here she has done two things,underestimated their income and massively overstated their weekly childcare costs to hmrc. Either way it will come out and they will have a bit debt to pay.