Tax Credit dropping my £500 a month from next year?

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Just had a bit of a bombshell from good old HMRC. I called to update my DH income for this tax year, as he's self-employed and it varies a lot. So I get the usual Amended Award notice and it gives us a predicted award figure for next year of about £150, £500 less than we've received each month this year. Turns out this year's award was based on last year's figures, when I was on maternity leave and DH was in first year of self-employment having been made redundant at this time last year! With nursery fees of £1200 per month, there's no way it's worth me working if this is accurate. The figure's just won't stack up!

The thing is, at the moment we as a family are a net gain to the tax coffers, as although one of our tax contributions equals pretty much what is returned to us in tax credits, the other is money in society's pot. If I quit work (and it will be me, not DH...) I'll make no contribution at all and be a financial burden needing unemployment benefit of some kind from the state. Lose, lose, right?

Has anyone else had this scare and had it all work out? I love my job, but I can't work at a loss!

sad, but still festive

It was the same for us - with mat pay they deduct £100/week of your earnings then work out your award. The second year I am working 30 hours a week but only take home about £250 a month after chilcare! Nightmare - we only get £38.50 a month in tax credits now. I am only working as I know that next year when DD is 3 she gets 15hours free childcare, so it'll be worthwhile-just!

You won't get much unemployment benefit if your child is under school age (I think). I was told it's about £64 a week (I was made redundant last year but luckily walked straight into a new job so didn't go down that route).

Good luck!

You were getting £650 a month? . I get about £60

Cheers PrincessScrumpy I think my kids must be further apart in age than yours. DS1 gets the early years grant towards his nursery place, but the cost is still high. My take-home after childcare is less than £200 a month for 38-40 hours, although obviously in theory childcare is a family expense and not my personal cost...

He starts school in September, so maybe I just have to manage until then, when I'll save £500 odd on nursery fees.

Seems a bit of sudden drop to me tho!

I only have DD at the mo - fingers crossed for a 2nd soon but I've timed it that DD will be starting school just before I would return to work after maternity leave! Cannot afford 2 in childcare!

Tax credits are crazy - last year (when I got help towards childcare) I called and told them I'd changed jobs so actually my costs had reduced a bit - they couldn't tell me on the phone what the difference would be and I was really worried until the paperwork came through telling me I was getting £50 a year more! No idea why and I assume they'll come after me at some point but when they do they can have the sodding £50 back. Either that orI was underpayed in the first place. Takes too long on hold on the phone to bother calling back!

It would really help to know how they are worked out so you can decide what the best arrangement is for your family, wouldn't it?

They're a mystery to me, and the wisdom of working them out based on the previous year's income is doubtful, although I can see that it's tricky on a variable income. I'm on an hourly rate and DH is freelance, so I just double what we've earned by the end of September and tell them that. Then hopefully DH can offset some of his expenses and we'll be owed a little bit at the end of the year to cushion the blow.

I'm thinking of reducing my hours anyway, as it just isn't worth it. The childcare costs are ridiculous, partly because the govt foot half the bill for people in a certain income bracket. I reckon when Tax Credits are cut, nursery fees will have to come down too. Roll on September 2011 when DS1 starts school!

I just wish i could understand how it is worked out - there is no transparency and it is impossible to work out yourself, you are at the mercy of their helpline. Does anyone out there understand the calculations?