The Perfect Juggler’s Guide to Tax Credits
Whilst the sun has been shining outside I am stuck at my computer, trying to get my head around the annual conundrum that is tax credits. The groan heard around the country when that A4 envelope thuds through the letter box must be audible far and wide. Or it would be if everyone received theirs at the same time. I received mine two weeks ago and have already had a slightly curt letter with red lines in it saying I need to get on with it or I’ll owe them money.
What do the numbers mean?
The only problem with tax credits is no one actually understands the sums they use to get the numbers they do. So you never have any idea whether you will get any money or not, or even worse, whether you’ll end up owing them money because they didn’t do their sums right in the first place.
What I do know is that you need your P60 from the financial year just gone, about an hour of quiet time, many cups of tea and preferably some chocolate digestives to make the task a little easier.
Last year I had to pay money back to HMRC despite giving my exact figures of gross pay, pension contributions, childcare fees etc etc etc so I was debating whether it was worth even attempting to claim anything this year. But every little helps (unless they’re taking that little away) so I thought I’d do a bit of research.
Where to look
Gov.uk was pretty unhelpful as usual (I’m allowed to say that by the way as I work with it on a daily basis by the way). Lots of ‘you may’ and ‘you could’ but no ‘definitely will’ or ‘definitely won’t’. The Tax Credit Calculator tells me something different every year so I’m not sure I should rely too heavily on that either.
I then wandered over to the lovely Gingerbread.org.uk who I found out do courses in trying to understand tax credits which shows it’s not just me! But then I found this amazing factsheet which spelt it out for me and I thought it would be useful for you too:
How to work out your tax credits.
- Add all the amounts listed in the factsheet above (called elements) that apply to your family. This is the maximum amount of tax credits your family is entitled to.
- If you’re working (or treated as working) 16 or more hours a week, and your income (before tax and national insurance) is less than £6,420 a year, you get the maximum amount of tax credits
- If your income is more than £6,420 per year, deduct £6,420 from your income. What is left over is called your excess income. (Ha ha)
- Work out what 41 per cent of your excess income is (total income, minus £6,420, divided by 100 then multiplied by 41)
- Deduct this amount from your maximum amount of tax credits (this was worked out in step one)
- This is the amount you are entitled to.
Using these sums (and a calculator), I should be eligible to receive £67 tax credits every four weeks. This is somewhat different to the £129 the Gov.uk Tax Credits Calculator told me. I guess all I can do is fill out the online form before 31 July and wait to see.
Have you filled out yours yet?