Personal/Occupational Pensions and Tax Credits

nad1611

I wanted to clarify something which I've been advised about. My husband was about to take out an additional occupational pension at work. I thought I'd check out what our lowered income would mean in terms of WTC. Apparently nothing, it's only a Personal Pension that you can make any increased claim for WTC for.

It's lucky because we thought it would be an occupational pension too, but no. Can someone confirm or deny this. To clarify then he wanted to add to a pension at work and thought we'd get an increase in WTC, but this is only possible if it is a personal pension. Thanks

zagfles

No this is not right - all pension contributions are deductible for tax credits. But with works pensions the contribution (nearly always) reduces taxable/P60 income, so you don't need to deduct it separately, it's already done for you.

Example:

1) Wage £20,000, work pension contribution £1000, P60 will show £19,000 and that's what you declare.

2) Wage £20,000, no works pension, personal pension contribution £1000 (gross). P60 will show £20,000, and you can deduct £1000 so you declare £19,000. (Google TC825)

Just be careful if you use "salary sacrifice" - search this forum for the discussion on this.

nad1611

Thanks for your response. Well this is exactly what I thought until I spoke to WT Office today. I even rang back to speak to someone else, as I usually do,to make sure the advice was correct.
I explained the scenario of my husband adding to a NHS Pension (would that make any difference) and how I would go about informing them this year that for 2011/2012 that my husband's income would be less.
They said basically that unless the Pension was a Personal Pension and not an Ocupational Pension, the P60 would still show the what my husband has earned after tax and any pension contributions to a work pension would not be deducted from the final figure.

Now I'm really confused?

Actually I've just phoned the wages dept and they have said that the total for the year has already had the pension contributions deducted. Interestingly I phoned the same wages dept this morning and wass told the opposite, so you can see why I got confused. It's amazing how many people who should know,don't.
So to clArify then if the pension is taken out through pay then there will be no need to fill in a TC825?

zagfles

nad1611 wrote: »

Thanks for your response. Well this is exactly what I thought until I spoke to WT Office today. I even rang back to speak to someone else, as I usually do,to make sure the advice was correct.
I explained the scenario of my husband adding to a NHS Pension (would that make any difference) and how I would go about informing them this year that for 2011/2012 that my husband's income would be less.
They said basically that unless the Pension was a Personal Pension and not an Ocupational Pension, the P60 would still show the what my husband has earned after tax and any pension contributions to a work pension would not be deducted from the final figure.

Now I'm really confused?

Actually I've just phoned the wages dept and they have said that the total for the year has already had the pension contributions deducted. Interestingly I phoned the same wages dept this morning and wass told the opposite, so you can see why I got confused. It's amazing how many people who should know,don't.
So to clArify then if the pension is taken out through pay then there will be no need to fill in a TC825?

Yes, for the vast majority of employers. There have been posts here about employers (I imagine small ones) who have a stakeholder pension setup and take contributions out of net pay, but that's very much the rare exception. A large employer like the NHS won't.

If he's increasing his pension contribution then just tell TCO the expected taxable pay, which will be reduced by his pension conts. You should see the reduction in his "taxable pay to date" figure on his payslip - this figure, at year end, will be what appears on the P60.

kerryallc71

hi .. my husbands on a stakeholder pension and his pension payment is paid from his net wages ( after tax and NI is deducted ) .. more about deducting pensions etc below ( i copied it from the hmrc website ) ..

Pension deductions
As an employer you're not obliged to run a pension scheme. However, if you employ more than five people you will generally need to offer your employees access to a stakeholder pension scheme if you don't already offer one of the following:

an occupational scheme access to a personal pension scheme into which you contribute at least three per cent of salary
If you give employees access to a pension scheme - whether this is one that you run yourself or one that's administered by a third party - you'll need to deduct your employees' pension contributions from their pay.

Contributions to a registered pension scheme attract tax relief and are deducted from an employees' gross pay.

Contributions to an occupational pension scheme that uses the 'net pay' arrangement are deducted from employees' gross pay.

Contributions to a personal pension scheme must be deducted from employees' net pay after deduction of tax and NI.

Deductions for pension contributions should be shown separately on the employee's payslip.You must pay pension contributions that you've deducted from your employees' pay into the pension scheme within 19 days of the end of the month in which you made the deductions.
If you administer your pension scheme in-house, you must use the HM Revenue & Customs (HMRC) Pension Schemes Online service which provides a secure way of viewing information, making returns and filing reports.

http://www.hmrc.gov.uk/paye/payroll/day-to-day/paying.htm

http://www.hmrc.gov.uk/forms/tc825.pdf - this will tell you about what can be deducted as well .

nad1611

Thanks for all your advice everyone. I have got it clear now;)