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Where Taxpayers and Advisers Meet

Tax Credits - Proof of Income

Martin H 83
Posts:4
Joined:Mon Aug 21, 2017 11:25 am
Tax Credits - Proof of Income

Postby Martin H 83 » Thu Aug 31, 2017 7:52 pm

I have two sources of income; my main job being part time which I am paid for by bank transfer. My other source of income is somewhat irregular. I play music and go on whatever bookings come my way in any given week, therefore I have no way of knowing how much I'm going to earn overall.

My question is this: what is the best approach in applying for tax credits in my situation? It really would help to have the extra money as being a musician can be quite stretching at times!

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: Tax Credits - Proof of Income

Postby robbob » Fri Sep 01, 2017 9:19 am

Hello Martin

You should regularly make estimates of where you think your income is trending during the tax year (if income number 2 is sole trader then it will be estimate of taxable profit rather than gross income that matters for that income source). If you think your income is likely to be materially higher or lower than the previous tax year come year end you can advise tax credits of what you think this years income will be. You should factor in any partners income too. Note with increasing income there is a 5k disregard in year - so if the increase is less than this amount your in year tax credits should not be affected. However as soon as you pass 6th April your tax credits will be based on the new level for the year just finished so getting your renewal done asap after 5th April and communicated should minimise any backdated adjustments needed. Tax credits go up and down and the taper rate of approx 40% when added to tax charged on extra income unfortunately can see dramatic changes in amounts paid - the more you try to use tax credits frugally the better and until the tax year is finished and your yearly declaration completed and processed always proceed with caution !

Final mention would be with regard to seasonality if you get most of your gigs either in summer or at xmas bear that in mind when you do calculations with regard to projections.


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