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Original poster

Tax Credits and unexpected Pay Rise

15 replies

Anono2022 · 12/10/2022 17:54

Hi

Firstly please no judgement. I'm just looking for some advice as I wasn't expecting this rise.

I started a new job late April. It's a term time role. Today I have been told all pay bands are getting a rise of a few thousand pounds. Sounds lovely and just what I need given I am really struggling to make ends meet and run a home and a family on one wage.
However the rise will mean I am no longer eligible for WTC at all. It will actually leave me shorter each month with the bit of WTC I get being removed. In fact because this will trigger an overpayment it will leave me owing them which I don't want to as I will be even more short each month.

Is there anything I can do? It sounds crazy that someone is worried about a pay rise but the fact it is going to mean I am left owing them money back actually bothers me alot more than it removing my entitlement altogether and leaving me with less a month. I dont think I can reject the rise as its a council thing and attached to my pay band but they idea of a payrise is no fun when you aren't actually going to benefit from it at all. It's the opposite.

Many thanks

OP posts:
Chasingsquirrels · 12/10/2022 17:59

Are you aware of the £2,500 income disregard? It might not affect you for the current year, and then you wouldn't be entitled from next year. Worth checking out.

Original poster
Anono2022 · 12/10/2022 18:00

It would fall within that, just. But wouldn't that still mean I would owe them back next tax year?

OP posts:
Lougle · 12/10/2022 18:02

It might not be as bad as you think. Firstly, there's a disregard of £2,500, so the first £2,500 of your pay increase is ignored. Then the remaining increase will reduce your award by 41p in each pound. You should never be worse off because you got an increase though. Is there some sort of backdating issue that makes it worse?

Chasingsquirrels · 12/10/2022 18:03

No, if your tax credit income for the current year is less than £2,500 different to your tax credit income for the previous year then your tax credits for the current year are based on the previous year income (this works both ways, both income increases and falls).

Then next year your tax credits would be based on this year's income - so you'd no longer be entitled.

Look at your award to see what income it is based on (which should be 2021/22 final award income) amd compare to your anticipated 2022/23 income. If less than £2,500 different then when your aware is finalised it will be based on 2021/22 actual income.

Original poster
Anono2022 · 12/10/2022 18:04

Yes it's backdated to April

OP posts:
Chasingsquirrels · 12/10/2022 18:05

And as Lougle says, if it is more than £2,500 different then the first £2,500 of the additional income is ignored. So while there maybe a small clawback it shouldn't be very much.

Glitterypinkmoomin · 12/10/2022 18:06

You need to tell them as soon as possible your new salary and the start date. They'll then recalculate your allowance. As pp said with the £2500 disregard you may not find it affects your payments. But if it does it's better for them to recalculate now rather than waiting until you're renewal is due next year.

Lougle · 12/10/2022 18:09

Only backdating to April shouldn't be an issue. When a backdate goes beyond a financial year it can get messy.

SuperCamp · 12/10/2022 18:11

Also, is the rise pro rata to f/t rather than term time only?

megletthesecond · 12/10/2022 18:15

I wonder if paying more into your pension would help?

ireallyloveyourtigerfeet · 12/10/2022 18:17

pension contributions are deducted from your gross salary when calculating income for tax credits purposes, are you able to increase your pension contributions at all?

Original poster
Anono2022 · 12/10/2022 18:39

Thank you for all your responses.

I'm actually shocked about this 2500 disregard as it's never been my experience before. I've never had an increase of more than £400 which was a Christmas bonus. Everytime I declared my Xmas bonus my award got reduced and I was sent a letter being told I've been overpaid so my payments have been reduced accordingly. This was when my salary fell well within tax credit thresholds so i wasnt at the top end. I am now a few thousand pound short of the threshold where I lose WTC altogether which is why I'm worrying.

Yes the rise will be pro rated however will still be quite a big chunk. I believe it's been fought by unions and only agreed recently.

I was wondering about my pension contributions. Obviously money in my pocket would be much better but if it is a difference of owning them money or not I know which one I'd prefer.

OP posts:
unicornsarereal72 · 12/10/2022 18:56

I put any pay rise I get into my pension. Although not ideal it has worked well for me

Babyroobs · 12/10/2022 19:39

Have you ever thought about getting a benefit calculation for Universal Credit ? So much simpler and payments based on real time earnings so little chance of these awful overpayments .

Original poster
Anono2022 · 12/10/2022 19:52

I've always been told I will be worser off on UC and past calculations have confirmed this but quite a large amount. If anyone wants to PM me to do a private calculation I would appreciate it?

Right now I am thinking my pension will be the best option

OP posts:
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