Child and Working Tax Credits - when do adjustments due to change in income start?
A family has three children and household income of £25,000, with one partner employed full time and the other self-employed part time.
The full time partner is going to be put on a three day week, with income dropping by 40%, so £10,000 income reduction. This is likely to be a fairly permanent situation due to lack of work.
If this happened at the end of August, when would Tax Credit payments adjust from? Would it be immediately or would there be a wait until next April?
Am I right in calculating that the net effect of a £10,000 reduction will be 27% (assuming no student loans), being 41% increase in tax Credits, 20% reduction in Income Tax and 12% reduction in Employees National Insurance?
If the above is correct, and looking at the opposite and promotion or an increase in income, its an effective tax rate of 73% so there isn't an awful lot of financial incentive to do more work is there?
Thanks for advice on this.
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