Article from Tyne Valley Express
At this time of year, we’re all feeling a little cash-strapped and in the current economic climate, money is very much on all our minds. It is of particular importance to those affected by separation or divorce who have found themselves in new, challenging financial circumstances. I have recently met with a number of clients who have been left struggling to cope with their financial situations and do not know what they are entitled to.
So this month I am going to write about Tax Credits, which are payouts from the state made regularly into your bank account to support those with children or on a low income. They are paid via the Tax Office and anyone aged over 16 and resident in the UK can apply to receive them. It is estimated that about 90% of families with children may be eligible for them and even people with household incomes of up to £50,000 may be able to make a claim. You may also qualify if you have no children but are working and have a low income.
Tax credits are calculated using household income. So it is the income of both partners which is used to work out tax credits. Once separation occurs, however, then the income for the household is obviously based on only one person. And somewhat strangely, any maintenance a person receives from a former spouse is disregarded for the purposes of tax credits. So once a high earning husband leaves the family home, even if he pays £1,000 per month maintenance, the household income is based only on what the wife earns.
As well as maintenance being disregarded for calculating tax credits, so too is capital. It is the income from capital that is taken into account for tax credits purposes. So if the remaining wife has savings of, say £80,000, on which she gets interest of £1,600 per year, it is only the interest of £1,600 which the tax credit office will consider.
It is important to keep the Tax Office up to date with any changes in your life that may affect your Tax Credits and the HMRC website has a calculator that will allow you to work out how much and which Tax Credits you are able to claim.
As owner of Major Family Law, I see a wide range of clients, both in terms of their situation and also in terms of their finances. This has prompted me to include some articles about tax credits and general tax on my website www.majorfamilylaw.co.uk, with a particular emphasis on issues arising from relationship breakdown.