corporate finance 25
Incomes are falling but £4.32b is left unclaimed
Recent surveys indicate that incomes are failing to keep pace with inflation. As a result, real income is effectively falling, writes Zoe Peck of Harwood Hutton
It is doubtful that this comes as a surprise; however, it may be surprising to learn that with 5% inflation every year (it was 5.3% in February) the value of money halves in just 15 years.
Unfortunately, there is no means of slowing the rising cost of living but there is an opportunity for boosting income, even for millionaires.
In a report published by HM Revenue & Customs this year, it was estimated that up to £2.95b of working tax credits (WTC) and £1.37b of child tax credits (CTC) were unclaimed in 2007/08. This is a total of up to £4.32b left unpaid.
Tax credits are often all too quickly dismissed but for those who have the ability to manage their income, it is an opportunity that should not be ignored.
So what are tax credits?
This is the first of three articles covering the subject.
Tax credits are not a tax saving as the name suggests, but a tax free cash award paid directly into the recipient’s bank account. The amount paid is based upon circumstances and household income.
Broadly speaking, those with at least one child should qualify for CTC where annual household income is below £41,300. It is currently worth up to £3,100 per year for the first child and up to £2,560 for each additional child thereafter. A family with three children and income below £15,000 may receive £8,220 tax free each year.
Those who work should qualify for WTC where annual household income is under £12,900 if living alone or £17,700 for a couple. It is currently worth up to £1,550 per year for a single person or £3,500 for a couple.
For those who exceed the income thresholds and chose not to reorganise their affairs to qualify, if an employer, there is an opportunity to assist employees with claims in order to
boost their income without giving unaffordable pay rises.
Tax credits are calculated and awarded on a daily basis. For every day they remain unclaimed, they are permanently lost. Backdating is possible but only for a maximum of 3 months so it is vital to claim as soon as possible in order to preserve full entitlement.
Harwood Hutton has a comprehensive Tax Credits service and is able to assist with new or existing claims.
Details: Zoe Peck 01494-739500
zoepeck@harwoodhutton.co.uk
HELPING BUSINESSES MOVE FORWARD
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www.bdo.co.uk BDO LLP is authorised and regulated by the Financial Services Authority to conduct investment business. THE BUSINESS MAGAZINE – THAMES VALLEY – JUNE 2011
www.businessmag.co.uk
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