I have a client who now has £26,000 in a savings account mostly accumulated from compensation she received in a court case. The compensation is not taxable in any form. She is still claiming full working tax credit as a single person because her earnings are below £6,000 per year including the interest she receives on these earnings. She is self employed and works well over 30 hours per week. Do the people, on this site, think she ought to cancel her claim for tax credits? I have told her to stop claiming but cannot find anything clearly, in the tax credit rules, that stops her claiming because of the savings she has accumulated. Perhaps some one could point out any rule negating her claim so that I can show her that it is in her interest to stop claiming.
As trawler asked whether it was fraud and whether I was involved I will come clean - the person in question is me as, when I asked the question, I had £26,000 in the bank but earnings of less than £6,000. Well now things are at last going right for me, £200,000 in the bank and earnings probably between £15,000 to £20,000, I have stopped my claim for tax credits. Because of all the financial turmoil I have been in, since September 2004 when I got involved with involved with my ex business partner, I have needed tax credits to be able to live. Now, because of my change in fortunes, I have decided to cancel my claim for tax credits at the point where I know I shouldn't be claiming.
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...under tax credits it is the income from capital invested, interest/dividends/IFP, that is included in calculating whether tax credits are due.
...under Universal credit this changes & it is your capital that counts in the calculation. The amount you are entitled to reduces if you have capital of £6000 and if your capital exceeds £16,000 no tax credits are due.
there is supposed to be some legislation that you cannot be worse off under Universal credit than you were under tax credit & therefore your current level of tax credits would continue until there is a change of circumstances & then the Universal credit rules would kick in.
I would say that your client is fully entitled to claim Working tax credit.
Level of capital
...under Universal credit this changes & it is your capital that counts in the calculation. The amount you are entitled to reduces if you have capital of £6000 and if your capital exceeds £16,000 no tax credits are due.
Is that liquid capital do you know or would homeowner equity come into play?
Tax credits do not take account of savings, only the amount of interest as interest is taxable. Also they ignore the first £300 of the interest. So if she earns say £500 PA on the savings, the Tax Credits people are only interested in £200 of that as her income.
Although when universal credit is rolled out, she will not be able to claim due to her savings, she is perfectly entitled to claim tax credits and working tax credits now as its based solely on her taxable income.
For tax credits, the self employed can state any number of hours worked, but I think under Universal Credit their self employment will have to bring in at least the value of minimum wage for the number of hours stated, and if not then their entitlement is reduced accordingly.
For now though she is perfectly entitled to claim tax credits and working tax credits.
As I understand the 24 hours is for a couple? I understood they only had to work 16 hours equivalent to minimum wage to be eligible. I may be wrong though. If she has a partner who is working 16 hours she must only contribute a further 8 hours.
Unlike Pension Credit...
With Pension Credit a hypothetical deemed inflated investment income is deemed to arise ("make 'em live off their capital" attitude) - however for Working Tax Credits and Child Tax Credits capital is disregarded. However if compensation includes interest then I would include that on the next WTC / CTC declaration.
It is worth remembering that pensioners who work sufficuient hours may qualify for WTC, even if not for Pension Credit - the latter (PC) deems an over-inflated income from capital whereas WTC ignores capital and is only concerned with actual taxable income (and investment income has a £300 disregard anyway).
I'm sure this question has been edited?
I recall something about the 24 hour rule, hence my answer, and now there is no mention of it.
Oops
I think that the reference to "24 hours" was in a different thread, around 10 days ago [I did try to find that other thread, when I saw your first post, but was unable to locate it in order to clarify ] - sorry !Basil.
This is what happens when I'm trying to use Aweb on my phone!
Have I read this correctly? on 11 December you had £26,000 in the bank but as of today you have £200,000?
Care to let the rest of us in on your secret of success?
Pleased you have recovered all monies owing to you as you seem to have had rather an eventful few years.