Worked Example For The Calculation Of Income Limits
The results for an amended Current Year award calculation for the award period 6 April 2009 to 5 April 2010 are
- 2008-2009 (Previous Year) income: £26,000
- 2009-2010 (Current Year) income: Not yet notified
Entitlement period 1: 6 April 2009 to 20 June 2009
Income for the 76 days in the entitlement period: £5,413.69
| Entitlement | Maximum amount | Taper start point | Taper amount | Amount due |
| WTC Work | £943.16 | £1,336.77 | £943.16 | Nil |
| CTC Child | £931.76 | £3,755.13 | £646.83 | £284.93 |
| CTC Family | £114.00 | £10,410.96 | Nil | £114.00 |
Entitlement period 2: 21 June 2009 to 5 April 2010
Income for the 289 days in the entitlement period: £20,586.30
| Entitlement | Maximum amount | Taper start point | Taper amount | Amount due |
| WTC Work | £3,586.49 | £5,083.24 | £3,586.49 | Nil |
| CTC Child | £3,543.14 | £14,279.37 | £2,459.70 | £1,083.44 |
| CTC Family | £433.50 | £39,589.05 | Nil | £433.50 |
The Income Increase Allowance amount for 2009-2010 is
£25,000
The Entitlement annual minimum taper start point amounts for 2009-2010 are
- WTC Work - £6,420
- CTC Child - £16,040
- CTC Family - £50,000
Step 1 – Identify if income limits are needed
Income limits are required for the award as
Note: ESA start or end dates cannot be earlier than 27/10/2008
And
- Finalisation income for the year of the award calculation (2009-2010) has not been notified
Step 2 – Identify the ‘taper category’ for each Entitlement Period in the award period
- Entitlement period 1 – the taper calculation has reduced the WTC Work entitlement to nil and the WTC Child Care entitlement has been reduced by the taper calculation, but not to nil. So this Entitlement Period falls into the ‘Taper Slope category
- Entitlement period 2 – the taper calculation has reduced the WTC Work, WTC Child Care and the CTC Child entitlement'. The CTC Family entitlement has not been reduced. So this Entitlement Period falls into the ‘Plateau Case’ category
Step 3 – Apply the rules for each ‘taper category’ to calculate an upper limit and lower limit amount for each Entitlement Period
The award has been calculated using Previous Year income, so the income limits are determined as follows
- Entitlement Period 1 – Taper Slope rules
- Upper Limit: The total award is greater than the minimum payable amount (£26), so the Upper Limit amount is the annual Previous Year income amount plus the Income Increase Allowance (£26,000 + £25,000) = £51,000
- Lower Limit: This is the annual Previous Year income amount = £26,000
- Entitlement Period 2 – Plateau case rules
- Upper Limit: This is the annual minimum taper start point amount for the CTC Family Entitlement plus the Income Increase Allowance (£50,000 + £25,000) = £75,000
- Lower Limit: This is the annual taper end point for the CTC Child Entitlement. The taper end point for the entitlement period is found by adding to the taper start point amount, the amount of income needed to reduce the Child Entitlement amount to nil
- (CTC Child) £3,543.14 divided by 0.39 (taper rate) = £9,084.98 (amount of income needed to reduce this to nil)
- The taper start point amount is £12,331.39 + £9,084.98 = £21,416.93 (taper end point amount for the entitlement for the period)
- As the entitlement period is for less than a full year (289 days), the taper end point must be calculated on a pro rata basis for use in the income limit calculation
- £21,416.94 divided by 289 days x 365 days = £27,049.076
- The Lower Limit is £27,049 (rounded down to the nearest £)
Step 4 – Identify the final Upper income limit and Lower income limit amounts
Upper income limit - the lower of the Upper Limit amounts calculated for the two entitlement periods
- Is the one for Entitlement Period 1 - £51,000
- Lower income limit - the higher of the Lower Limit amounts calculated for the two entitlement periods is the one for Entitlement Period 1 - £26,000
Step 5 – Identify if these need to be converted into End of Year Income Limits
Conversion is not required as the calculation is for Current Year
The final 2009-2010 income limit amounts for this amended award calculation are
- Upper Income Limit - £51,000
- Lower Income Limit - £26,000
