By Simon Preston

Making a new claim for tax credits

I have tried to put as much information as i can on here, as some of the changes mean you may lose Tax Credits altogether, the 50+ Return to work payment is being axed and Child Benefit will stay the same as it’s not being increased from April 2012.

At the moment, the Tax Credit Office can pay tax credits for up to three months before the date they get your claim form. This is known as ‘backdating’ your claim.

From 6 April 2012, this period reduces to one month. If the Tax Credit Office receives your claim on or after 6 April 2012, they’ll only be able to backdate it up to one month.

This change means you could lose money if you delay claiming. For example if you have a baby on 1 June, but your claim’s not received until 1 August, your payments will only start from 1 July. You’ll lose out on a month’s payment.

Most people will lose out as basic payments have been frozen from 2011 levels although the goverment would like people to think they haven’t.

The number of hours for claiming Tax Credits is being increased from 16 to 24 hours hours per week(couples will need to be working at least 24 hours per week combined)

How payments from April 2012 may effect you http://www.ifs.org.uk/bns/bn108.pdf  http://www.hmrc.gov.uk/budget2011/tiin6425.pdf

Payments have been frozen at 2011 levels. The 50+ Return to work payments have been axed losing between £1,365 and £2,030

Rates April 2011 April 2012
Basic element £1,920 £1,920
Couple and lone parent element £1,950 £1,950
30 hour element £790 £790
Disabled worker element £2,650 £2,790
Severe disability element £1,130 £1,190
50+ Return to work payment(16-29 hours) £1,365 Withdrawn
50+ Return to work payment(30+ hours) £2,030 Withdrawn

Child Benefit not increased

Child Benefit – £ per week
Rates April 2011 April 2012
Eldest/Only Child £20.30 £20.30
Other Children £13.40 £13.40

If you get the ’50-plus element’ – this will end                                              

                                                         RATES APRIL11/ APRIL12                 

50+ Return to work payment(16-29 hours) £1,365 Withdrawn
50+ Return to work payment(30+ hours) £2,030 Withdrawn
Income Tax allowances 2010-11 2011-12 2012-13
Personal Allowance (1) £6,475 £7,475 £8,105

But this will be offset by the fact you can earn £2,400 less from April than you could last year

as allowances have been reduced.

Rate 2010-11 2011-12 2012-13
Starting rate of 10% is for savings only: £0-£2,440 £0-£2,560 £0-£2,710
Basic rate: 20% £0-£37,400 £0-£35,000 £0-£34,370

Changes to tax credits are happening from 6 April 2012. These include a lower income limit for Child Tax Credit. For couples with at least one child, there are new working hours rules for Working Tax Credit. How far payments can be backdated is also changing. Find out about these and all the other changes, and how they might affect you.

The income limit for Child Tax Credit is going down

Child Tax Credit payments depend on your circumstances and income.

At the moment, you can usually get some Child Tax Credit, as long as your income is not over the limit of £41,300. From 6 April 2012, this limit will be lower for most people.

From 6 April 2012, the income limit for you will depend on your own situation. But as a very rough guide, you might not be able to get Child Tax Credit from 6 April 2012 if:

  • you have one child, and your annual income is more than around £26,000
  • you have two children, and your annual income is more than around £32,200

But it’s important to know that:

  • this is a rough guide
  • the income limit for you may be different, as it depends on your own circumstances

You could still qualify from 6 April 2012 if your income is above these amounts. For example, if you pay for registered or approved childcare, are disabled, or have more than one or two children.

You can find out how your own payments may be affected by checking your award notice for 6 April 2011 to 5 April 2012.

Couples with children – new working hours rules for Working Tax Credit

At the moment, if you’re responsible for at least one child and working at least 16 hours a week, you can get Working Tax Credit.

From 6 April 2012, the rules for couples with at least one child are changing. In most cases, to qualify for Working Tax Credit your joint working hours will need to be at least 24 a week.

This will mean:

  • if you both work your joint weekly hours must be at least 24, with one of you working at least 16 hours a week
  • if only one of you works, that person must be working at least 24 hours a week

If neither of these apply, your Working Tax Credit will stop from 6 April 2012. But there are some exceptions to the new rules – see the sections listed just below.

You can increase the hours you work, so you would still be entitled to Working Tax Credit.

If one of you is aged 60 or over

You’ll still qualify for Working Tax Credit as long as the person who’s 60 or over works at least 16 hours a week.

If one of you gets extra Working Tax Credit because of a disability

You’ll still qualify for Working Tax Credit if both of the following apply to the disabled person:

  • they work at least 16 hours a week
  • they qualify for the ‘disability element’ of Working Tax Credit

If one of you is ill, an inpatient in hospital or in prison

You’ll still qualify for Working Tax Credit if one of you works 16 hours or more, and the other is:

  • getting certain benefits due to ill health – for example, contribution-based Employment and Support Allowance, or Disability Living Allowance
  • an inpatient in hospital
  • in prison – serving a custodial sentence, or remanded in custody awaiting trial or sentence

Your income goes down – change in how it affects your payments

If your annual income for the current tax year is lower than last year, you may get extra tax credits for the current year. A tax year runs from 6 April one year to 5 April the next.

The lower your income, the more tax credits you can get. But from 6 April 2012, when your income goes down it might not affect your payments until the following year.

You should always tell the Tax Credit Office your new lower income, to help make sure you get what you’re entitled to.

If your income goes down in the current tax year by £2,500 or less

Your payments won’t change for the current tax year – if all your other circumstances stay the same. But the Tax Credit Office will use your new income figure to work out what to pay you for the following tax year.

If your income goes down in the current tax year by more than £2,500

The Tax Credit Office will re-work your tax credits. But they will ignore the first £2,500 of the reduction. They will take the full amount of the reduction into account when they work out what to pay you for the following tax year

Changes to how far payments can be backdated

Making a new claim for tax credits

At the moment, the Tax Credit Office can pay tax credits for up to three months before the date they get your claim form. This is known as ‘backdating’ your claim.

From 6 April 2012, this period reduces to one month. If the Tax Credit Office receives your claim on or after 6 April 2012, they’ll only be able to backdate it up to one month.

This change means you could lose money if you delay claiming. For example if you have a baby on 1 June, but your claim’s not received until 1 August, your payments will only start from 1 July. You’ll lose out on a month’s payment.

Reporting changes

At the moment, if a change means your payments go up, you’ll usually get the higher amount backdated for up to three months.

From 6 April 2012, this period reduces to one month. If you report a change that means your payments go up, the higher amount will only be backdated by up to one month.

To make sure you get your higher payments backdated to the earliest possible date, you should report all changes within one month.

If you get the ’50-plus element’ – this will end

If you’re getting the extra amount of Working Tax Credit, called the ’50-plus element’, this stops from 6 April 2012.

This means your payments could go down from 6 April 2012.

This change also means your Working Tax Credit could stop altogether, unless you’re working a certain number of hours. This is explained in the next section.

If you’re aged 50 or over – working hours changes

If you’re getting the extra ’50-plus element’, you only need to work at least 16 hours a week to qualify for Working Tax Credit.

When the 50-plus element stops from 6 April 2012, if you’re not working a certain number of hours your payments may stop altogether. You can increase the hours you work, so you would still be entitled to Working Tax Credit.

From 6 April 2012, you’ll need to be working the following hours to qualify for Working Tax Credit.

If you are not responsible for at least one child

You – or your partner if you’ve got one – will need to work at least:

  • 30 hours a week
  • 16 hours a week – if you’re aged 60 or over, or you’re entitled to the ‘disability element’ of Working Tax Credit

If you’re responsible for at least one child

You’ll still qualify for Working Tax Credit if either of the following applies:

  • you’re single and working at least 16 hours a week
  • you’re in a couple, and meet the new hours rules for couples – see the section above

Tax credits rates

There will be changes to some of the tax credits rates (or ‘elements’). One of these is that the maximum amount of the child element of Child Tax Credit will go up from £2,555 to £2,690.

Follow the link below to find out what the new tax credits rates will be.

Useful contacts

  • Tax Credit Helpline and Tax Credit Office
  • National insurance (NI) will also see you paying more (see rates below)
  • National Insurance contributions – rates and allowances
    £ per week 2010-11 2011-12 2012-13
    Lower earnings limit, primary Class 1 £97 £102 £107
    Upper earnings limit, primary Class 1 £844 £817 £817
    Upper accrual point £770 £770 £770
    Primary threshold £110 £139 £146
    Secondary threshold £110 £136 £144
    Employees’ primary Class 1 rate between primary threshold and upper earnings limit 11% 12% 12%
    Employees’ primary Class 1 rate above upper earnings limit 1% 2% 2%
    Class 1A rate on employer provided benefits (1) 12.8% 13.8% 13.8%
    Employees’ contracted-out rebate (for contracted-out salary related schemes only) 1.6% 1.6% 1.4%
    Married women’s reduced rate between primary threshold and upper earnings limit 4.85% 5.85% 5.85%
    Married women’s rate above upper earnings limit 1% 2% 2%
    Employers’ secondary Class 1 rate above secondary threshold 12.8% 13.8% 13.8%
    Employers’ contracted-out rebate, salary-related schemes 3.7% 3.7% 3.4%
    Employers’ contracted-out rebate, money-purchase schemes 1.4% 1.4% Abolished from 6 April 2012
    Class 2 rate £2.40 £2.50 £2.65
    Class 2 small earnings exception £5,075 per year £5,315 per year £5,595 per year
    Special Class 2 rate for share fishermen £3.05 £3.15 £3.30
    Special Class 2 rate for volunteer development workers £4.85 £5.10 £5.35
    Class 3 rate £12.05 £12.60 £13.25
    Class 4 lower profits limit £5,715 per year £7,225 per year £7,605 per year
    Class 4 upper profits limit £43,875 per year £42,475 per year £42,475 per year
    Class 4 rate between lower profits limit and upper profits limit 8% 9% 9%
    Class 4 rate above upper profits limit 1% 2% 2%
    Additional primary Class 1 percentage rate on deferred employments 1% 2% 2%
    Additional Class 4 percentage rate where deferment has been granted 1% 2% 2%
    1. Class 1A NICs are payable in July and are calculated on the value of taxable benefits provided in the previous tax year, using the secondary Class 1 percentage rate appropriate to that tax year.

              Who pays National Insurance?

You pay National Insurance contributions if you’re an employee or self-employed and you’re aged 16 and over, as long as your earnings are more than a certain level. If you’re employed you stop paying National Insurance contributions as soon as you reach State Pension age. If you are self-employed, you stop paying Class 2 contributions as soon as you reach State Pension age and Class 4 contributions from the start of the tax year after the one in which you reach State Pension age.

State Pension age is 65 for men born before 6 April 1959 and 60 for women born before 6 April 1950. But it will gradually increase to 65 for women between 2010 and 2020.

Some people also pay voluntary National Insurance contributions. For example, you might choose to pay them if you:

  • aren’t working and are not claiming state benefits
  • haven’t paid enough National Insurance contributions in a year to count for the State Pension or other long term state benefits
  • live abroad and want to maintain your state benefits entitlement

Find out about to changes to the State Pension age (Opens new window)

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