Income Changes (Info)

Before you make any income changes you must follow the guidance in Establish If A Change Can Be Made to establish if the change needs to be made by a specialist team.

Initially tax credits will be calculated using the Previous Year ( PY) income and will show as status [S] System estimated. This may not fully reflect a claimant's present or new circumstances and may result in an over or underpayment at the end of the year. A claimant may request that their claim for tax credits be calculated using their Current Year ( CY) income.

You can accept the income of a partner from a claimant. This does not apply however in cases where a family break up has occurred. If a claimant(s) CY income increases by £25,000 or less, compared to their PY income, this will not affect their CY payments. However, the reported increase must still be applied to the system as it could have an effect on their provisional payments for the next year. If they expect their CY income to be more than £25,000 higher than their previous year's income they should tell us straight away, so that we can adjust the tax credit payments during the year. If they don't tell us, they may receive too high a tax credit award during the year and have to repay any overpaid amount.

When they renew the claim we will base the award for the following year on the full amount of income for the year just passed. (For example, 2005-2006 awards are initially based on income received during 2004-2005, so the full increase of their income will be taken into account in the award for that year.)

Calculation of income

If the claimant is providing PY income from work this can be found on their P60. The claimant may have more than one job and/or a pension which could mean they will have more than one P60. The claimant may also have other sources of income, for example, Investment Income, Foreign Income, Social Security Income, Student Income, Property Income, Trading Income, this list is not exhaustive. These will not be shown on a P60.

When entering or amending CY income for a joint claim, you must always obtain both claimants’ estimated amounts for CY income amounts. Even if these amounts are the same as those held within the PY income fields.

It is not possible to use the CY income of one partner and the PY income of the other. If the income for one of the claimants has not changed, use their PY amount(s) and enter this in the CY income field(s). Advise the claimant that this is the figure you are using for CY income.

You must ensure that all CY income amounts are recorded with status (E). You must not leave a mixture of amounts with status (S) and status (E)

The correct estimated income for the whole year must be confirmed with the claimant.

For example, if the claimant says ‘Please use my new salary of £xxx.xx per week’. You must ask the claimant to provide an estimate for the whole of the current tax year.

If the claimant has more than one source of income, then income for each must be provided.

When to enter £0.00 income

If the CY income for one of the claimants is nil, you must still complete the income details for that claimant. In this case you must enter ‘0.00’ to represent a nil amount. Do not leave the field blank.

If income for PY is to be removed because you have received confirmation from the claimant, there is no income for a year, to prevent the computer from recreating a system estimate, you must enter '0.00' and select either (E) estimated or (A) actual from the drop down menu.

Where you have established that income has been recorded in the wrong year, for example an amount entered in the CY field instead of the PY field. You must remove the incorrect amount and leave the amount field blank. Zeros must not be entered in the income field in this case.

If you are correcting an income amount, which was captured in error, for example entered within the self-employed income fields instead of the earnings income fields. Delete the amount that was entered in error, returning it to a 'blank' field, do not replace the figure with zero. Then enter the amount in the correct field, selecting the appropriate status.

If a claimant has a foreign employer whose tax year does not end on 5 April, the claimant will need to adjust their non-UK annual income figure to reach an annual figure that is equivalent to that in the UK tax year (6 April to 5 April the following year).

PY-3 income changes can no longer be applied to the computer. This is because in the Function AMEND APPLICATION, the income screens only support income details for 4 years.

Salary Sacrifice Scheme

Salary sacrifice happens when an employee requests to give up part of the pay due to them, in return for the employer’s agreement to provide the employee with some form of non-cash benefit. The 'sacrifice' is achieved by varying the employee's terms and conditions of employment relating to pay.
 

We consider each salary sacrifice scheme on its own merits. When the claimant tells you that they are joining a salary sacrifice scheme they need to provide details of the scheme. The information we need is

• The contract variation for the claimant who has joined the scheme. If there is more than one scheme we need the contract variation for each scheme
   
• The original contract of employment
   
• A payslip before and after the variation
   
• The agreement between the employer and the benefit provider
   
• All other documents relevant to the scheme, for example any booklets given to the claimant as a guide

Once all information is received, all details will be sent to Technical Advice Line (TAL). TAL will then forward the details to the (This text has been withheld because of exemptions in the Freedom of Information Act 2000) who will decide whether the salary sacrifice should be included or excluded from the claimant’s income, based on the information supplied about the scheme. You must not comment on how to set up a salary sacrifice arrangement or whether the customer claimant should join a salary sacrifice scheme.

Note: Do not refer the case to TAL if the salary sacrifice scheme is for childcare