A tax credit system based solely on previous year’s income would run the risk of not matching payments to claimants’ current needs. To counter this, claimants whose income falls significantly during the year can apply to have their awards re-assessed on the basis of a forecast of their current year’s income. The forecast income will be reconciled after the end of the year with the actual income for that year, and any tax credits overpaid will have to be repaid.
Dai is a self-employed carpenter aged 55 who has had recent
periods of unemployment. He works 32 hours a week. His income is
low enough to entitle him to claim Working Tax Credit (WTC) for
2005/06 and his claim is based initially on the estimate of his
2004/05 income he provided by 06/07/2005. During the year he finds
that his estimate of his CY earnings is significantly lower than
the PY estimate that he has already supplied and he provides a
revised lower estimate of his income.
The award is re-calculated and additional payments of tax
credits made. He will need to provide a further estimate of his
2005/06 income by 06/07/2006 and to correct it, if necessary, by
31/01/2007.
He is entitled to:
