Changes in income

Your income has gone up

Your tax credit award is initially based on the previous tax year’s income. If your income has gone up by more than £2,500 (when comparing this tax year with last tax year), you should let the Tax Credit Office know so that you are not overpaid. Increases of less than these amounts will not affect your award, but you should still let the Tax Credit Office know, because the change will affect your tax credits in the following tax year.

Your income has gone down

If you know that your income for the current tax year is going to be significantly lower than your income for the previous tax year, you might want to ask the Tax Credit Office if they can revise your award so it is based on an estimate of the current tax year’s income. However, be aware that your income needs to decrease by at least £2,500, otherwise they will continue to use the previous tax year. If they use the current tax year, they will add £2,500.

Getting your tax credits award revised based on a reduced income means that you get more money at a time when you are likely to need it, and may also mean that you are entitled to other help like the Sure Start Maternity Grant without having to wait until the end of the tax year.  However, it does mean that you risk overpayment (see Overpayments of tax credits) if you give the Tax Credit Office an estimate which is too low. Alternatively, you can leave things as they are until the end of the tax year when you may get some money back from the Tax Credit Office (called an underpayment).

What income counts for tax credits

Remember that annual income for the tax year means your income and the income of a partner who lives with you (same sex and opposite sex partners are treated in the same way). This applies even if you did not live with your partner for the whole of the tax year you are in.  Income for the tax year is not necessarily the same as your annual salary, because you might have started a job or changed your hours part way through the tax year.

There is more information on the effect of changes to your income on the GOV.UK website.

WARNING: If you give the Tax Credit Office an estimate for the current tax year which turns out to be too low (because you make more money later in the tax year), and they use this to calculate your tax credits, you could end up being overpaid and will have to pay them back.

If you have further questions and would like to contact our advice team please use our advice contact form below or call us.

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