Child tax credits and back pay following re-grading. Help please!

[gaelicsheep]

Hello. This is a nice problem in a way, but I've a feeling it's going to get very complicated...

I've just received a decision on re-grading which means that I will shortly (?) be receiving an amount of back pay that amounts to around 40% of my earnings over the past 18 months (ie over last two tax years). Obviously I have been claiming tax credits in that time based on my actual income (there being no guarantees when or if a pay rise would be received).

This means that I will have been overpaid tax credits over the past two years - possible to the tune of around £60 a month. How will this be dealt with by IR please? Will they demand a lump sum back in one go or claw it back gradually? And will they take into account that had I received the pay rise when it was first due I'd have had the benefit of the year's grace on a pay rise under £25k?

If there are any TC experts out there I'd be very glad to hear from you!

OR, do I just treat the back pay as part of this year's pay? But since it will still be much less than a 25k increase I would get to use last year's income for this year's CTC assessment and next year's income for next year's CTC (as it will be lower than this years), thereby coming out on the right side of this. That couldn't be the case could it? Sounds too good to be true.

I think it will be treated as this years income only because this is the tax year that you've received it IYSWIM.

That's good then, isn't it? I think??

Yes I think so, you may get quite a bit less CTC this year but next year if you get it done on current income it should go back up a little IYSWIM.

I'm not actually sure I'd even get less this year. I'll be on maternity leave for much of this year which means the increase will definitely be less than 25k. Plus we'll be entitled to the new baby element.

Previously when our income has increased by (much) less than 25k we've been able to use the previous year's income figure. I couldn't believe it - I questioned it with them over and over but it was definitely correct. It just sounds too good to be true.

But no matter really, I'm well chuffed about the pay rise. It feels like it's about time things started going right for us.

Remember to deduct £100 per week that you receive maternity pay for they don't do it automatically for you!

You mean they disregard that as income? Actually, that rings a bell from last time around. Thanks.

Funniest of all you get a letter saying that your declared income doesn't match the IR stated one by the exact amount of smp......