Another working tax credits question

[mrwadders]

Hello.

I've been reading about Working Tax Credits, and wondering if I will be able to make a claim. Of course, I can just ask HMRC, but thought I'd ask the ever-reliable UKBF first

From April 2013, I will have quit my full-time job, to set up my own company. For the next two years I plan to live off my ever-dwindling savings. I have no partner. According to my business plan financials, I will be making a loss in the first year, and a humble profit of £3k in year 2, before things solidly improve in the 3rd.

Therefore, I will be without income for the 1st two years, working a large number of hours a week (60+). There are two bits that makes me unsure if I can claim - 1)is that I'm not doing 'normal' work. I'm not getting paid to offer a service, or create something. Most of my time will be spent going to craftfairs, researching online, building up a strong website, meeting designers etc. 2) That I have money in savings that I can draw from.

Any insight into Working Tax Credits for solo trader startups, with £0 profit but personal savings, would be appreciated.

Thanks, and seasons greetings to all.
Simon

 

[angelcare]

i am in the same stuation.hope someone will give info
so did you ask HMRC?if so what they said?
thanks

 

[Alan]

Problem 1 is that the system changes in April 13 to universal credits and I know nothing about how that will change things (meant to make it easier and fairer hahaha)

Problem 2 is the current system is driven of your prior tax years earnings, so if you leave a well paid job to start a business they will only allow you initially a 'drop' of 25%, so you may not get any or very much credits for the first year of low pay.

Savings are not a problem, but interest earned counts towards income.

Doesn't matter about 'normal' work, you are working if you are not claiming job-seekers.

Calculator here http://taxcredits.hmrc.gov.uk/Qualify/DIQHousehold.aspx

 

[mrwadders]

Thanks Moibot. I will be waiting until after April before I contact HMRC, so will keep an ear open for the changes. I had understood that if you're persistent and mention £0 earnings this year, they will 'take that into account' irrespective of past year's earnings.

We will see...
Thanks again.

 

[mrwadders]

Incidentally, for anyone else reading this post, here is a little more regarding Universal Credits.

http://www.dwp.gov.uk/docs/universal-credit-faqs.pdf

 

[Alan]

Seems that universal credit for working people comes into impact April 2014.

 

[UKSBD]

Problem 2 is the current system is driven of your prior tax years earnings, so if you leave a well paid job to start a business they will only allow you initially a 'drop' of 25%, so you may not get any or very much credits for the first year of low pay.

Savings are not a problem, but interest earned counts towards income.

Doesn't matter about 'normal' work, you are working if you are not claiming job-seekers.

Calculator here http://taxcredits.hmrc.gov.uk/Qualify/DIQHousehold.aspx

Have you a source for that?
I thought they add £2500 on top of your new lower wage.

The calculator isn't very good as it only calculates from the date you use it to the end of the current year.

A far better one is here - http://www.familyinvestments.co.uk/family-nest/tools/Tax-credits-benefits-calculator/ (still using this years figures though)

 

[Alan]

You are right it is £2,500 of the drop that is ignored, not 25% I was working from memory for the last person I helped apply, just so happened the 25% and £2,500 actually were about the same in that case.

 

[UKSBD]

Do you know if the £2,500 is per person or per claim?

I assume it is per claim
ie.
If a couples combined income drops from £40k to £20k the figure used for tax credits is £22,500 and not £25,000