WFTC and Inheritance.

nad1611

This should get the benefit haters going!!! We are going to be receiving an inheritance we will invest it and receive the interest on that investment. Now for the purposes of WFTC do I declare the inheritance or the interest from the savings.

Before you all start moaning I am perfectly willing to stop my claim if need be as I think it's only right that if I can now afford more I don't need the benefit, but I simply wanted to know.
So do we declare the inheritance or the interest from it.Can't give a figure as we simply don't know.Thanks.

karenx

Just the interest if its more than £300 per year you will get from it.
But if you get council tax benefit or housing benefit this will stop if its more than 16k you recieve

nad1611

karenx wrote: »

Just the interest if its more than £300 per year you will get from it.
But if you get council tax benefit or housing benefit this will stop if its more than 16k you recieve

No, no council tax or housing benefit' So we can invest the money and then declare the interest we earn the year in arrears as it were?

bumpybecky

if it's in ISAs you don't need to declare it at all

nad1611

ooh even better.

zagfles

Or - even better.

Don't invest the inheritance but live off it. Instead invest most of your earnings in a pension scheme such as a SIPP. That could massively increase your tax credits!

Of course you'd have to be prepared to invest till retirement and then be subject to the restrictions on access which come with pension schemes.

cte1111

Tax credits is based on your income, so you will need to include any interest or dividends from investments but the capital does not affect your award.

nad1611

zagfles wrote: »

Or - even better.

Don't invest the inheritance but live off it. Instead invest most of your earnings in a pension scheme such as a SIPP. That could massively increase your tax credits!

Of course you'd have to be prepared to invest till retirement and then be subject to the restrictions on access which come with pension schemes.

Why would the Tax credits increase, surely you'd still be declaring your income and if it's not invested surely you'd be declaring the investment too. I'm not in the position as having been able to save before so this is all new to me, so I'd appreciate you spelling that one out for me.Thanks

zagfles

nad1611 wrote: »

Why would the Tax credits increase, surely you'd still be declaring your income and if it's not invested surely you'd be declaring the investment too. I'm not in the position as having been able to save before so this is all new to me, so I'd appreciate you spelling that one out for me.Thanks

Pension contributions reduce your income for tax credits purposes.

If for example you have 2 kids and an income of £30,000, you wouldn't get much more than the family element of tax credits - about £12 a week.

But if you contribute £24,000 gross (£19,200 net) to a personal pension, then you can deduct that contribution from your income (google TC825). With an income of £6000 you'd get tax credits in full - about £200 a week!

Be aware there are "notional income" rules but I don't think these can be applied to pension contributions - see the "tax credits muddle" thread.

nad1611

Zagfles, I have been looking into what you said on my post, it's amazing what you find out on here.

To wrap this up I'll make an example to make sure I've got this right.

So we get our inheritance, we use that to live on, we then use part/all of our income to put into a pension.

The following year when we claim tax credits, our P60 will show a reduced income and we'll therefore be entitled to increased Tax Credits.

In effect we'll have to wait a year for this to benefit from it? Thanks

Sorry just remembered the TC825 does this get sent along with your Tax Credit application or to a seperate body?

zagfles

nad1611 wrote: »

Zagfles, I have been looking into what you said on my post, it's amazing what you find out on here.

To wrap this up I'll make an example to make sure I've got this right.

So we get our inheritance, we use that to live on, we then use part/all of our income to put into a pension.

The following year when we claim tax credits, our P60 will show a reduced income and we'll therefore be entitled to increased Tax Credits.

In effect we'll have to wait a year for this to benefit from it? Thanks

Sorry just remembered the TC825 does this get sent along with your Tax Credit application or to a seperate body?

No you should benefit straight away, if you phone and tell them. Your tax credits are initially based previous year income, but if you expect current year income to be less you can phone them with an estimate and they'll increase your payments. Or you can wait till the renewal and you'll get it as a lump sum.

Your P60 will only show a lower amount if you make the contributions into your employer's scheme, if you make personal pension contributions you need to deduct the gross amount as per the TC825 form. Don't do this using "salary sacrifice", see the other thread I mentioned.

Be aware though that when you draw the pension, this will affect any means tested benefits you might be entitled to then eg pension credit, housing benefit. It won't affect the basic state pension or SERPS/S2P which aren't means tested.

The TC825 isn't sent, you need to download it and print it off. Send it with your renewal (but they'll probably lose it so make sure you take a copy).