How would a well paid 3 mth contract affect my tax credits?

[Harimad]

Background: was made redundant a while back, and have recently been retraining 'on the job', earning next to nothing for a family business and dipping into savings to make ends meet.

Since I've been working at least 16hrs/week, I've been claiming WTC which has really helped us.

However, today an old colleague phoned to offer me a 3 month contract working 4 days a week (3 in the office, one from home) at a consultant rate of £275/day .

There will be a bit of a commute for this, but aside from having to work out how logistically I could do this, juggling childcare and commuting, how would it affect my tax credits?

The job is definitely for 3 months only, and I'll be trying to keep up my studies for my retaining in the evenings, going back to work at the family business afterwards - where I'll still be earning next to nothing until I've built up my own contacts/network, which will take months more. Family is fine with me doing this as they know the extra money will really help and they can't pay me anything more as it's commission based, but I don't want to juggle like a mad thing for 3 months only to find that we're no better off due to my tax credits being cut off due to increased earnings...

Help!! Advice from someone who understands all this far more than me would be most gratefully received...

Bump!

Bump (wondering if anyone can advise on this!)

Surely it would be better to take the work than not - from a point of view of your CV and therefore future earnings?

Why don't you ring tax credits helpline? the consultancy thing might lead somewhere in terms of contacts, etc? surely it's better to earn your own money than to be on tc if you have a choice, even if the amount in your pocket is the same

Well, possibly, but the work is in my 'old field' of marketing / print, and I'm currently retraining to work as a mortgage broker! So, if I intend to make a real push on the new career it makes no odds as I AM currently working in a brokerage, just waiting until I'm fully qualified before I have a chance of earning.

I'm more concerned with the fact that I'll have to do massive family juggling, commuting 4 hours a day etc. to do this work, and the financial benefit of it may be eradicated if they remove my tax credits for this 12 weeks, despite going back to earning next to nothing whilst retraining afterwards... Would they just look at the overall earnings for the year in total and amortise the credits across 52 weeks?

I am going to ring on Monday ninah (if I can get through!) - I just wanted an idea if anyone knew as I have to say yeay or nay on Monday to my friend.

If the amount in my pocket is the same, it's not really worth doing it as the hours will be much longer, I won't have so much time with the kids and as my DH works shifts, I won't see him much either. It really has to have an additional financial bonus to make that much change for just 3 months (that being said, if it were more than 3 months I probably wouldn't consider it due to all of the above!).

I've worked for over 20 years before my redundancy and paid a LOT of tax, and hope that by this time next year I'll be earning enough from the new career to not need tax credits, so I don't feel too badly about being on tax credits whilst I retrain.

put the figures into www.entitledto.com (or .co.uk?). You will need to do it on an annual basis and you will then get your tax credits etc entitlement for the whole year and can assess the position.

Depending on where you are on the income spectrum then your maximum tax, NI & tax credit clawback will be 73% - mine is. If you aren't currently working yours will probably be lower as you will have your income tax personal allowance and NI free band.

As to whether they would spread it - you have a set period after your circumstances change in which you need to tell them. I think they would change it to the lower level for that period and then go back to the higher level after.

Just remember that if its a consultant rate they will want you to go through an umbrella company so that £275 wil linclude EMPLOYERS NI which you will have to pay along with the EMPLOYEE NI.

The umbrella will also charge for you to use them.

they might be happy to pay her as self-employed, or give her a short-term employment contract.
Umbrella companies are a bloody sham and if you go down this route you really need to ensure that it is set-up correctly and IR35 isn't going to come back and bite you.

They might be though whenever day rates are mentioned its usually other than an employee.

Tax credits are usually based on your previous year's income. If you earn more than in the previous tax year, the first 10K extra is disregarded. So they would only look at the 8K-ish extra that you've earned compared with the previous year, and will take 41% of this off your tax credits award (ie about 3K, although this will depend on whether you're currently under the threshold of about 6.5K before they make any deductions based on income).

To avoid an overpayment it would be sensible to phone them at the beginning of the next award period (ie April) and tell them how much you expect to earn in the 2011-12 financial year so that they can adjust your award accordingly, rather than giving them the information at the end of the next award period when you will have already been overpaid.

Hope that makes some sense!

Thanks for all your advice.
Think I can put this 'contract' through billing it to my current family business which will hopefully save hassle, and will advise tax credits on Monday so will get in before the new tax year!
Phew! Not used to earning money being so much hassle!!
Thanks all!!