Help with my tax credits

[sharonmanc]

I am looking to come off income support as i have some exam marking at the end of the month on top of my first full time mindee, and should have another full time mindee very soon.

I am trying to get my fininaces straight, but was wondering when i give my estimated income to tax credits is it before or after tax.

My childminder friend has just come off income support ( well 8 months ago) and gave her estimated income as zero as she would make a loss this year with start up costs etc and only have 1 part time mindee right now. However i always though for tax credit i have to give my income before any deductions, but then I know there are different rules for childminders ( as i found with being on income support)

Any help will be appreciated, as I really dont want to get in a muddle with finnaces before I have even got going

[zippy]

I think youre getting things a bit muddled together, you have to give tax credits your before tax figure. You will work this out by estimating the profit you will make. Your income minus your expenses. Hope that makes sense, I'm not the best at explaining lol.

[sarah707]

Zippy is right... but you can say you won't earn anything or even that you expect to make a loss if that's the case.

However if you do earn money they will take back some of what they have paid you.

If you are not sure you should ring them and check

[sharonmanc]

Thank you ladies, so if i am paid say 10000 for the year and then I have expenses of 4000, my income would be 6000, and I would give tax credits an estimate of 6000 as my income, is this right?

[sarah707]

I have removed my comment as I think it was confusing

[sharonmanc]

so i dont dedeuct anything, just tell tax credits my actual incme before any expenses etc - ha ha I know I am terrible at these things, i always need things spelling out so i get it

[Mouse]

Has it changed then? I thought you had to give them your net profit figure. That what I always did.

[Zoomie]

For tax credit purposes I always give me net figures (income less expenses).

Best to just ask (but have both figures readily available) when you ring up (and make sure you record persons name etc for your records).

[sharonmanc]

Hi zoomie, I have asked a few times and been given different info, I was thinking it would be net, after expenses, otherwise a person could not say they would earn nothing, if they had not taken off expenses. I am so confused mainly becaseu i have phoned so many different departments this week, tax credits and income support etc and just keep getting conflicting info

[Goatgirl]

Has it changed then? I thought you had to give them your net profit figure. That what I always did.

Same here and I'm still on tax credits.

They need to know what you'll earn after expenses etc, as an estimate. If your income changes you need to let them know your new estimate for the year to avoid having to repay any overpayment.

I don't know your individual circumstances but my experience has been that as I haven't earned over the tax threshold (single income here) while claiming, that any sum that falls within that profit (£8,000 ish?) has made no difference to the amount I was awarded.

I actually found the tax credits people really helpful once I managed to get hold of someone, and it was them who explained about the taxable income being the bit they 'count' so it might be good to give them a ring to get things clear.

I wasn't sure at first what my profit would be but used the IS/HB formula of income x 1/3 to estimate my profit. Then at the end of each financial year when I do my tax return the actual figure I end up with for Inland Revenue is what I give tax credits so they know if there's any discrepancy between what they paid and what i was entitled to

Hope that's not too confusing. good luck

best wishes,
Wendy

[zippy]

Sarah I think you're mistaken there, you tell them you're pre tax figure. Income minus expenses before tax taken off

[zippy]

Sarah I think you're mistaken there, you tell them you're pre tax figure. Income minus expenses before tax taken off

Sorry misread, forget last comment,

[Goatgirl]

Hi zoomie, I have asked a few times and been given different info, I was thinking it would be net, after expenses, otherwise a person could not say they would earn nothing, if they had not taken off expenses. I am so confused mainly because i have phoned so many different departments this week, tax credits and income support etc and just keep getting conflicting info

I wouldn't take much notice of Income support people as they did several calculations for me before the switch which were all wrong and very misleading. Basically I was better off on tax credits even working only 16 hours a week for peanuts. Then I went up to 30 hours (still for peanuts haha) and my TC award went up too. Being so used to the IS level of income it took me ages not to see my earnings from childminding as 'free money' .

Income support reduce your IS by a proportion of your earnings. Tax credits top up your earnings to more than Income support is worth and you can keep earning more ( until your profit reaches each threshold - they're on the TC website) without that affecting your tax credit payments.

[sharonmanc]

Thank you Wendy, it is all so confusing, am trying to figure out the finances so i can pay the bills, I am a worrier and like to feel in control, the financial side of childminding and not having a wage, like when i was teacing, has made me a bit wobbly, and now not being able to find the answers from those who should know has not helped.

Wendy just found it on their page, and the bit on what to take off to determine your income
http://www.hmrc.gov.uk/taxcredits/st...t-income.htm#3

it's all making sense now

[MrAnchovy]

Oh dear, I am afraid you are getting more and more confused - that is the information you have to provide if you are EMPLOYED, not a self-employed childminder.

The right bit for the self employed is here, and as you can see it starts off with the amount of PROFIT (if any) that you have made i.e. your income LESS your expenses.

Some of this confusion comes from the fact that for some other benefits, including Housing Benefit, Council Tax Allowance and Income-based Employment and Support Allowance, there is a rule that applies for working out self employed earnings called the 'two thirds disregard'. This works by estimating your profit as just 1/3 of your total income, so for those benefits you do give your gross income before expenses.

The final confusing element is that many childminders believe that there are some 'special rules' that apply only to childminders. This is not correct, everything is the same for childminders as any other self employed person EXCEPT

• only childminders can claim heating and lighting and other household expenses using the 33%/10% full time percentages, other self employed people have to do a more complicated calculation (but it is often better for childminders to use that more complicated calculation, particularly if they don't look after their own children while minding.
• only childminders don't have to retain receipts for expenditure less than £10
• childminders can deduct 10% of their income as an expense to cover wear and tear to domestic furniture and equipment, although other businesses such as furnished lettings and bed and breakfast can also claim this

That's it.

[Tam's Tribe]

Has it changed then? I thought you had to give them your net profit figure. That what I always did.

I agree - same for hubby and I as we are both self employed - I give Tax Credits my expected profit (income less expenses) and then in January I call them with my actual figures!

Done it like this for 3 years!!

[sharonmanc]

Thank you for the clarification and the correct link, I was kind of in the right area (kind of )

I will be printin gthis page off tonight and adding it to my finances folder

[angelinthegarden]

Thank you so much for this thread, has answered a lot of my questions and now I need to sort this out.

Thank you for your help.

[sarah707]

I have removed my comments as I believe I was confused.

Thank you to Mr Anchovy for giving the correct information