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  • FIRST POST
    • Newbiejono
    • By Newbiejono 8th Oct 17, 12:38 PM
    • 7Posts
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    Newbiejono
    Child Tax credits
    • #1
    • 8th Oct 17, 12:38 PM
    Child Tax credits 8th Oct 17 at 12:38 PM
    Hello all ,

    My mother is currently in receipt of child tax credits for a kid she cares for. She has approx 600.

    My mother is 67, my father had equity release on their house a few years ago / she currently pays 200 a month to keep the i intrest standing still and owes 30,000 to aviva.

    My father sadly passed away and there is an option to have his pension of 200 a month paid in one lump of 40,000

    If this 40,000 is used straight away to pay 30,000 house an 7000 credit card, will this mean the tax credits will stop ?

    The lump sum is tax free
Page 1
    • poppy12345
    • By poppy12345 8th Oct 17, 1:00 PM
    • 1,752 Posts
    • 1,584 Thanks
    poppy12345
    • #2
    • 8th Oct 17, 1:00 PM
    • #2
    • 8th Oct 17, 1:00 PM
    Hello all ,

    My mother is currently in receipt of child tax credits for a kid she cares for. She has approx 600.

    My mother is 67, my father had equity release on their house a few years ago / she currently pays 200 a month to keep the i intrest standing still and owes 30,000 to aviva.

    My father sadly passed away and there is an option to have his pension of 200 a month paid in one lump of 40,000

    If this 40,000 is used straight away to pay 30,000 house an 7000 credit card, will this mean the tax credits will stop ?

    The lump sum is tax free
    Originally posted by Newbiejono
    It won't affect the Tax Credits but what other means tested benefits does she claim if any?
    • xylophone
    • By xylophone 8th Oct 17, 1:20 PM
    • 23,611 Posts
    • 13,748 Thanks
    xylophone
    • #3
    • 8th Oct 17, 1:20 PM
    • #3
    • 8th Oct 17, 1:20 PM
    My father sadly passed away and there is an option to have his pension of 200 a month paid in one lump of 40,000

    The lump sum is tax free
    Your father was in receipt of an occupational pension?

    Is your mother proposing taking a small dependant's pension as a lump sum?

    If so, see

    https://www.pensionsadvisoryservice.org.uk/content/spotlights-files/uploads/Death_benefits_commutation_SPOT014_V1.3.pdf

    In such circumstances it would appear that the maximum trivial commutation would be 30,000 and it would be taxable as income in the year of receipt?

    https://www.gov.uk/looking-after-someone-elses-child

    Is she in receipt of any other benefits?

    Your mother needs to take advice specific to her circumstances.


    She might book an appointment with a benefits adviser at CAB?
    • Newbiejono
    • By Newbiejono 8th Oct 17, 2:19 PM
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    Newbiejono
    • #4
    • 8th Oct 17, 2:19 PM
    • #4
    • 8th Oct 17, 2:19 PM
    my mother and father were guardians of this child.

    My mother has

    Basic Pension plus something inherited from my father state pension. approx 530 a month

    She gets another private pension 150 per month

    Child benefit

    & Child Tax credits

    Her child gets DLA @ higher Rate


    The letter says the 40,000 is tax free, I have phone tax office 3 times today and had 3 different answers. the last answer wss the first 25 percent would be tax tree and the rest taxable.
    • xylophone
    • By xylophone 8th Oct 17, 3:00 PM
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    xylophone
    • #5
    • 8th Oct 17, 3:00 PM
    • #5
    • 8th Oct 17, 3:00 PM
    The letter says the 40,000 is tax free, I have phone tax office 3 times today and had 3 different answers. the last answer wss the first 25 percent would be tax tree and the rest taxable.
    Was your father in receipt of 200 a month from this pension?

    The pension was an occupational pension?

    Your mother could opt to receive a monthly pension of a percentage of what your father was receiving?

    The alternative to the above would be commutation to a lump sum?

    Have a look at the link I posted above.

    It seems to me that you must obtain a definitive answer from HMRC.

    It may be that you will need to ask the call handler to arrange for you/your mother to be rung back by a member of staff expert in the taxation of pensions.
    • Newbiejono
    • By Newbiejono 8th Oct 17, 3:27 PM
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    Newbiejono
    • #6
    • 8th Oct 17, 3:27 PM
    • #6
    • 8th Oct 17, 3:27 PM
    Yes my father was getting approx 300 per month, my mother has been given option to get 200 per month or tax tax free sum/

    o not sure what occupational pension means, it was a British coal pension. my father dies when he was under 75.

    I found this link, the table show about lump sums.

    .gov.uk/tax-on-pension-death-benefits
    • xylophone
    • By xylophone 8th Oct 17, 10:08 PM
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    xylophone
    • #7
    • 8th Oct 17, 10:08 PM
    • #7
    • 8th Oct 17, 10:08 PM
    https://www.bcsss-pension.org.uk/


    I have found a copy of the BCSSS fact sheet "Procedures on Death".


    Widow’s, widower’s and adult dependant’s benefits

    A pension for life will be paid to the widow or widower
    of a Scheme member. If family benefit contributions were
    paid for the full period of membership the pension is 2/3rds
    of the member’s pension
    ignoring any reduction for early
    retirement or adjustment for levelling option.
    Pensions payable to widows, widowers or adult dependants
    are subject to income tax.

    The amount of pension over and above the Guaranteed
    Minimum Pension* may in certain circumstances be
    exchanged for a tax free lump sum death benefit instead,
    provided the lump sum is below the deceased member’s
    unused Lifetime Allowance. The Lifetime Allowance for the
    tax year 2008/2009 is 1,650,000. Any lump sum death benefit
    paid in excess of the deceased member’s unused Lifetime
    Allowance will be taxed at the rate of 55%. Lump sum death
    benefits can only be paid if the member was under the age of
    75 at the date of his death.
    After that age, any benefits due to
    survivors must be in the form of a life pension.
    Taking a cash lump sum instead of a pension may not be in
    the best financial interests of dependants, who may have to
    live on the income for many years. The Trustees strongly
    recommend that dependants consider seeking independent
    financial advice before deciding whether to take cash from
    the Scheme instead of pension income.



    The above seems relevant to your mother's case - the lump sum benefit does indeed appear to be tax free but you could still confirm this through HMRC citing the specific information given in the fact sheet.

    Will your mother still receive some small pension in addition to the lump sum?
    • Newbiejono
    • By Newbiejono 10th Oct 17, 5:22 PM
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    Newbiejono
    • #8
    • 10th Oct 17, 5:22 PM
    • #8
    • 10th Oct 17, 5:22 PM
    yes she will get a small 50 per month payment
    • xylophone
    • By xylophone 10th Oct 17, 5:53 PM
    • 23,611 Posts
    • 13,748 Thanks
    xylophone
    • #9
    • 10th Oct 17, 5:53 PM
    • #9
    • 10th Oct 17, 5:53 PM
    yes she will get a small 50 per month payment
    Which will be the GMP - see fact sheet above.
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