WFTC and Inheritance.

nad1611

Thanks for that, that's clear now.. Just one more question I went onto a site which allows you to state your income etc in order to see if you'd be able to claim Tax Credits. I put in a suggested amount, as though we were using our income for Pension, but even when I went down to an income of 5448, it only meant we'd be entitled to £96 overall!

So I'm thinking is your scenario only the case if you are also receiving the Child Tax Credits and not just Tax Credits. We are receiving Child Credits for one child who'll be 18 and out of Full time Education in 2 years.

chelldavies

OP, on reading your first post I wondered why on earth you thought anyone would be on your case. After reading your last couple of post i now get it!

zagfles

nad1611 wrote: »

Thanks for that, that's clear now.. Just one more question I went onto a site which allows you to state your income etc in order to see if you'd be able to claim Tax Credits. I put in a suggested amount, as though we were using our income for Pension, but even when I went down to an income of 5448, it only meant we'd be entitled to £96 overall!

So I'm thinking is your scenario only the case if you are also receiving the Child Tax Credits and not just Tax Credits. We are receiving Child Credits for one child who'll be 18 and out of Full time Education in 2 years.

With 1 child and working 30+ hours with income of 5448 you'd get full tax credits about £143 a week.

I think you have to watch the results with some of these calculators ie is the amount per week, per year, or for the rest of the tax year.

Rates are here: http://www.hmrc.gov.uk/rates/taxcredits.htm
The first income threshold is 6420, if your income is less than that you get all the elements you're eligible for in full.

nad1611

chelldavies wrote: »

OP, on reading your first post I wondered why on earth you thought anyone would be on your case. After reading your last couple of post i now get it!

Really, why? I meant that whenever I've seen a post about Inheritance and Benefits in the same sentence, it seems to get people ranting. What's your understanding?

melly1980

zagfles wrote: »

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.

How sure are you on the notional income (dont worry I wont hold you accountable). Also, If your not sure is there anyone who specialises in advising on this like an IFA? (dont really want to go to the IR and discuss how Im going to try to shaft them :rotfl:)

nad1611

zagfles wrote: »

With 1 child and working 30+ hours with income of 5448 you'd get full tax credits about £143 a week.

I think you have to watch the results with some of these calculators ie is the amount per week, per year, or for the rest of the tax year.

Rates are here: http://www.hmrc.gov.uk/rates/taxcredits.htm
The first income threshold is 6420, if your income is less than that you get all the elements you're eligible for in full.

Yes thanks I've been reading the elements whilst posting. This seems a bit too good to be true really.

zagfles

melly1980 wrote: »

How sure are you on the notional income (dont worry I wont hold you accountable). Also, If your not sure is there anyone who specialises in advising on this like an IFA? (dont really want to go to the IR and discuss how Im going to try to shaft them :rotfl:)

I've seen it mentioned on chartered accountants' websites eg http://www.charlesburrows.co.uk/pdf/money_matters_Summer09.pdf
http://sandersgeeson.co.uk/html/moreabouttaxcreditplanningforbusinesses.html

It does sound like some accountants are suggesting this as a strategy, but I have read some warnings of notional income being a possibility, but not seen anything saying that TCO have actually used it for pension contributions.

Reading the above - they are going one step further in "shafting" HMRC - the first one mentions up to 98% relief - this must be taking advantage of the disregard to get double the extra tax credits! For instance if instead of paying £5k into your pension this year and £5k next, you pay £10k in this year, then because of the disregard your tax credits will be based on a £10k lower income both this year and next! (assuming your income doesn't rise next year).

The disregard is being cut and they are going to introduce a disregard for income increases too which would mostly put a stop to this "doubling" of extra tax credits. I wouldn't be surprised if something is done in the budget on Weds to stop all this too - such as limiting pension contributions or even introducing capital rules, as only those with savings to fall back on can really take advantage of this. Also the new universal credit which will replace tax credits has capital rules and they claim nobody will be worse off when it changes - so another reason why they might introduce capital rules before the changeover.

nad1611

Thanks Zagfles. I have been doing a bit of digging around about this whole issue. I have also read of people who would be no longer getting
Child Benefit doing just this, see here;
http://moneyfacts.co.uk/news/pensions/pension-contributions-could-preserve-child-benefit/

Unfortunately, it's likely as you say, that there will be some sort of capping of contributions but if it's still in the rules even with a upper limit of pension contribution ,it still might be worth doing. Thanks for suggesting this even if it doesn't pan out, there's nothing lost, it's cost nothing to find out.

nad1611

I think this answers our discussion;
http://www.hmrc.gov.uk/pensionschemes/faqs/contoccs.htm#a

Thanks.