Tax credits and new job

[SpideyMom]

Hi

Just looking for other experiences if possible please?

I feel trapped in tax credits and have been for 7 year and I hate it. HATE IT! I want to get off them completely.

I have recently decided that I need more from life for me and my child and need to better myself. This will include hopefully securing a better job and a better salary.

Coming off tax credits is a goal for me but it doesn't come without its worries. Mainly as it's worked over the year isn't it so I fear overpayments.

I currently earn just under 14k after my pension payments are deducted. I work 30 hours a week.

So for example say I work 6 months at the lower wage and then 6 months in the new job at the higher wage, it will very likely mean I will have been overpayed over the year because of the lower salary for the first 6 months (really hope I am making sense). Obviously I would inform them of any new job or income changes when they occur BUT they are still worked out over the year.

This is all very very early stages but things like this cause me anxiety when finances are concerned so I just want to get my head around it.

Has anybody had any experience of claiming tax credits then part way through the year finding a new job and no longer being entitled to them? So when renewal comes round in April had you been overpayed? And if so how did you have to pay it back, lump sum or installments?

Whilst I'm in the lower paid job I really need the tax credits to help us live very basically. But hopefully if I do get a better paid job I won't need them anymore which is such a dream of mine, however I wouldn't be in a position to but putting aside the equivalent of what's already been paid out to cover being overpayed.

I really home this all makes sense.

Thanks in advance x

Surely you just give them a new estimation of what you think you'll earn over the year
I haven't moved jobs however I have increased my hours so my wage has gone up slightly but the bonus structure has completely changed so I've no idea how that will work out compared to before. But I know I now can't get as much bonus as before. I just estimated a new amount for them for the next year. I overestimated in fact as I was so worried about being overpaid by them

I think im worried that my wage could potentially increase to a level I am no longer entitled to tax credits in which case whatever has been paid out so far would become an overpayment. Is that right?

It would be going back into a field I used to work in before having my child and I earned well. How likely it is that my wage will be high enough to no longer be entitled to them I am not sure however, I have been told its a higher basic wage and commission based so that could push me over the limit.

I'm obviously looking at the worst case scenario being that my earnings end up being over the earnings threshold so I won't have been entitled to anything even when I was earning much lower.

I think you just need to estimate what you'll earn and let them know and then they can work it out.
It's shit but I've overestimated mine cos I didn't want to have to repay money
But I'm sure I'm getting less that I should because of that

I will see what is happening first but with the earning potential I am worried it will take me over the earnings threshold completely. So im planning for an overpayment regardless. Just panicking that it will mean this year's whole entitlement will end up being paid back which at the moment due to such low earnings is 1.5k. Will have to see.

I need to take the risk now and want better for myself. Will just be crap that in doing that it could land me with a tax credit overpayment debt

Change your job around April.
I know that's not overly helpful, but it avoids the situation you are concerned about.

OR
Change your job but for the year you change make pension contributions at a level which still leaves you with the £14k relevant income.

My advice would be to look at switching to Uc instead - after getting a better off calculation done first of course. Many working people are better off on UC ( it's not great for non working people ). Uc is based on real time information so people rarely get overpaid. UC gets a bad press but in my own experience ( as an adviser ) it is a lot better in many ways. If you have savings then it may not be good for you as savings are counted for Uc wheras they aren't for tax credits but if this does not apply to you then I would get a better off calculation done via CAB or similar .

When I had an overpayment, I called and said I wanted to pay it back in instalments. If you have it worked out before you call them they normally accept it.

When you get a new job they recalculate the payments. Any overpayment will be small if you report the new wage straight away. You can spread the repayment over the overpayment so you don't have one big bill

I haven't read the full thread but just wanted to reassure you that I have changed job twice in the past year.

I went from job earning around £14k in February to one earning £25k Feb-April my tax credits didn't change massively as they estimated my total annual income between the 2 jobs and because I only had 1 full wage in new job before tax year ended.

I then changed again in June to job earning £26k and because this will be the case for the full tax year now my allowance has now reduced by around half.

They will use your P45 from old job and estimate earnings in tax year from new job to allocate a fair payment.

I have the same goal as you to get off tax credits, I think I most likely will be within the next year or 2 but the fact that my allowance has dropped so much and my salary increased I'm no longer scared of being without them if that makes sense.

Thank you for your responses.

And thank you @MrsBellamy the figures you are stating are very similar to those in my head. It is likely that the increase in wage will be that sort of level. Maybe even higher with bonuses taken into account.

I used to earn alot more, in the region of 40k, so a salary of around £25k probably doesn't sound great but it's such an improvement on what I've been earning. Tax credits have been a lifeline but I've spent my son's entire life literally just getting us by. Recently I've had a wake up call due to dissatisfaction in my current role and comments made, and to be honest I'm sick of fitting a stereotype that when you are a single parent your earning potential is low due to your responsibilities to your children. He will always come first but right now I feel trapped where I am because at least I am secure. I want more for us. I dont want to have to keep telling my son no we can't do anything as my earnings just cover our outgoings and food. I have no savings or safety net. Its been 7 years of constant struggle.

I also think way ahead and want to get off them well before my son leaves education as I dont want to be hit with such a drop when he leave college. Imagine 18 years or being used to an income them all of a sudden you lose TC, CB and Maintenance. I'd rather reach earnings now where I dont need them.

Thanks for your story. It makes me realise I actually can go from earning little to much more and that my situation as a single parent won't hold me back.

If you have 6 months on 14k and 6 months on 40k I think you’d have a lot to pay back. It really depends on how much your salary increases and for how many months of the tax year. Tax credits are being phased out soon so you could look at switching by to UC because they are done monthly. Or you could increase your pension contributions

@SpideyMom your story is so similar to mine, it took me a long time to see a feasible way out of it, and I totally get not wanting to be a living stereotype.
We will both get there and in the process even though we sometimes need to say no to the kids we are showing them that hard work pays off!

Best of luck for the future, I'm sure you'll do great and your DC will be so proud of you.

Yes this is my thinking. It's obviously the 'worst case scenario' but I have to consider it, just in case. But this is exactly where my head is with it. I would love to be able to start putting it aside now and not use the TCs money. I just can't. I wouldn't be able to cover our full outgoings if I did.

It's mad calling it the worst case scenario as long term it really is the best thing for me to do. But in the short term it could mean that I could have to pay back everything I've had so far which in any case would work out at alot (a few thousand pounds). Best thing would be to move jobs as close to the new tax year as possible however it looks more likely to be around October/November which is why it will make the difference.

I will look into paying more into my pension should I get the new role and know where I stand financially. Its just frustrating that I've needed TCs for the months on the lower wage and because ive chosen to put myself in a better position I will end up with a debt. So you get yourself to a place of earning better but all of a sudden you have to repay the money you were entitled to when you were struggling.

I suppose I'm just ranting a little now. I dont want it to scare me into not looking for something better to make us more financially secure. It just sucks that you to get better I am likely to end up paying money back.

Seriously consider additional pension contributions, keep your relevant income at the same level for the year, you won't be in any different a financial position than you are now but you'll have put that extra 5 or 6k into your pension.
Then come April you get your tax credits for next year recalculated based on your new income, and go from there.

Or, you continue making the pension contributions, it doesn't help you come off tax credits, but basically allows you to fund your pension with the tax credits.
Then when your child gets to 18 you can stop the pension contributions, that element of your income replaces the lost tax credits etc, and you have a nice little nest egg in your pension.

Well put it this way

If you stayed at your current job with your benefits, how much money would you earn in total?

If you got the better paying job and had to repay some of your benefits, would you still overall earn more than you did previously? If so, just go for my

It certainly sounds like there are options here. I'm definitely feeling more comfortable about it all. Depending on what happens I think you're right. Pay more into my pension until the next tax year, at least. I will then reassess. I'm discussing the new opportunity next week however I'm going to keep looking for others too. My head is definitely in a place where I need more from my job not only money wise, but job satisfaction too.

I think is time to start taking the risk to hopefully get us in a better place.

To answer the question would I still be better off with paying back some benefits, I've worked it out and to lose all entitlement completely I would actually be worse off earning higher, if I didn't make the bonuses.

I really need to see what's out there and then sit down with the numbers. It won't put me off taking on a new job but I need to get my head around it first. As of course I don't want to end up with less money than I do now.

This is why I feel trapped by tax credits. Obviously the more you work the less you get and rightly so, and the goal will always be to get off these as soon as I can. But its also disheartening working more to end up with less and possibly a debt because of it

I’m really glad you’ve asked this. I start a new job at £30k next week - a significant pay rise, and I’ve been self employed for 5 years. I’m worried about feeling well off this year then taking a hit in April.
Pension contributions could be a good shout - mine are pretty depleted

In the nicest possible way I am glad I am not the only one worried about this.

Congratulations on your pay increase. It's in sight for me and its something I never thought I'd experience again. May I ask how much of an increase will it be?

It must sound awful worrying about earning more money but no one wants to have to pay back what there were entitled to just because they improved their circumstances. They still needed the tax credits at some point. I sat down earlier looking at what i could put aside in the event of changing job's. I literally cannot cut any costs at the moment money is that tight.

It's also crap to think you will be earning more but will have a debt to HMRC because of it

I think my last tax return was about £22k. I still need to put in for last year, and I earned a lot less, but then with the grants I think it will end up around the same. I know it’s going to be a real mess, with throwing in SE, grants etc too. It’s a worry, for sure. I hate being reliant on tax credits, but I think (haven’t checked) I’ll be just over the threshold this year, and not by a lot, so I really don’t want a big overpayment.

I'd second the poster who said consider switching to UC after doing the calculations. I'm definitely better off on UC than on TC and as what you get is based on your monthly earnings there is little chance of overpayment

I've had a few UC better off calculations over the years and I'm always significantly worser off. It's so different I cant understand why it's so different. But I've been told its most like because I don't rent and am mortgaged. I've known couples who jointly earn more than me get more on TC but they are in rented. I get its based on real time and that's great but I couldn't switch because of the massive drop it meant for me.

Its feels odd worrying about earning more money. That's what everyone wants but if it means I could have to pay back all my tax credits I will be in a right mess, even on a better wage

How do you go about getting a better off calculation? I suspect I’ll be better off staying on TC as I have a mortgage and a some savings, but the idea of a real time calculation is quite appealing, I have to say.

A lady on here did mine but I believe citizens advice do them too. Ive always been better of on tax credits due to not renting

So today I had quite a lengthy informal meeting on an opportunity. Similar to what I used to do (10 years ago) with the potential to be so much more and possibly managing a team if all goes well. I'm excited, I no longer feel on the shelf career wise BUT I cant lie, nerves have set in. Please can someone reassure me that this is a normal way to feel?
If it was just me it wouldn't bother me no where near as much but as I have my little boy and a home to keep running there is a risk there. However if I stay in this frame of mind our lives will remain as they are, struggling every month.

Please can someone tell me the worries are normal?