Tax Credits and Pension Contributions Query

Camper_2

Hi. Please forgive me if this has already been answered in a previous post but I have a query regarding my Tax Credit renewal.

Tonight I renewed my Tax Credit claim for the coming year and gave them my income details over the phone. I mentioned that I made Gift Aid payments and Pension Contributions. The Gross Gift Aid payments were allowed as a deduction from my Gross Income but not my Pension Contributions because they are paid through my employer.

I know I cannot deduct pension contributions which are taken from my Gross Pay but my contributions are from Net pay after tax and do not appear on my P60 at all They are a voluntary contribution to my employers Group Scheme to which my employer also contributes. The tax is then reclaimed by the pension company and increases the value of my contribution and I can see the net and gross payments on the pension website seperately from my employers contribution.

The tax credit notes do say not to incude "contributions you paid through your employer" but as the contributions are a deduction from my take home pay I would have thought that the gross amount of my contribution received by the pension company should still be deducted from my earnings.

I did try to argue the case but the gentleman just said that he could not allow deductions for pension contributions paid through the employer (by whatever means). If however I paid them out of my own pocket not by my employer they could be allowed as a deduction. In the end I finalised my award without the pension contributions being deducted.

I would really appreciate comments from anyone. Not being able to deduct the contributions from my earnings will make a big difference to our tax credit award.

Thanks

zagfles

Other people have had the same problem, see https://forums.moneysavingexpert.com/discussion/3170710

It's a PITA when employers set up pension schemes in this way. Suggest you write to TCO with copies of payslips, pension statement etc to prove contributions are being deducted from net pay.

Camper_2

Thanks for that information and link. I am putting together a letter now and hopefully it will soon get sorted out.

Camper_2

I have written a letter to the tax credit office. Although the claim was finalised without taking into account my pension contributions will they still be able to "unfinalise" it so to speak? or is it too late?

zagfles

As you tried to give them the correct information they should be able to adjust it. They tried to adjust mine once several months after being "finalised" because they thought I'd given them the wrong info (I hadn't).

Camper_2

Thank you. There must be many people potentially missing out on enhanced tax credit awards because their pension contributions are not deducted off their gross earnings. Same goes for Gift Aid donations. This year there is no mention in the renewal notes apart from under the "if you are self employed" section but these can make a huge difference to some peoples awards.

I can see where the tax office is coming from. They obviously dont want people deducting pension contributions twice but the wording in their notes sort of dismisses all employee contributions paid through the employer regardless of the type of scheme (Mine is a Group Personal Pension with a smaller employer). I did think of phoning again but to be honest I think I will just post the letter because It's easier to show the figures. Shame because I expect it will take some time to get sorted out now (hopefully).

Has anyone else been been here and got the Tax Credits Office to put things right?

Allybally

I hope someone can help with this.
My P60 shows Gross Pay £xxx then Pay (*) £xxx which is Gross Pay minus Pension deductions but before Tax and NI.
In previous years I have given the figure shown at (*) on my renewal.
I am now worried because it says in the notes not to deduct any Pension Contributions made through your employer.
I phoned the helpline twice to check which figure I should put down because I thought it was really unfair that I have to put down the higher figure just because I pay my Pension through my emeployer.
Both times I was told to put the Gross figure not the figure at (*). However having taken the time to properly look at my P60 it actually says if you have to complete a Tax Return or to claim Tax Credits use the figure at (*). Now I am totally confused. Who do I believe??
Any advice would be greatly appreciated.

Camper_2

If I am correct, and hopefully someone else will confirm too, you should give them the lower figure because that is after your pension contributions have been deducted and is also the true taxable pay which they are after. That is why they tell you not to include payments made through your employer because your pension contributions are already alowed for in that lower figure. If you give them the higher figure then you wont have allowed for your pension contributions and your tax credit award could be lower (based on presumed higher earnings).

If my scheme worked this way I wouldnt have the issue I have with the TCO now but as it is my payments are made by my employer slightly differently which is causing the confusion.

Hope this helps.

MsShorty

AllyBally, you should be giving Tax Credits the figure for gross income minus pension contributions but before tax and national insurance are taken off, i.e. the lower figure on your P60.

My pension is paid in the same way, but my P60 only shows one amount - gross income minus pension contributions. This is the figure I give to tax credits.

Hope this helps.

kerryallc71

hi , camper .. my husbands pension is a stakeholder pension ( paid from his net wage - after his tax & NI have been deducted from his gross wage ) .. my husband pays tax & NI on his full taxable / gross pay , his p60 does not show that he has paid into a pension it only shows his gross / taxable pay . so the figure you give to tax credits is your taxable / gross wage , but with your gross pension contributions already deducted but don't include any contributions your work contributed to your pension . your gross pension payments include any tax relief your pension would have earned in the year .

some people have there pension paid from there gross / taxable wage , before tax & NI have been deducted . they will pay less tax & NI due to this , they will receive tax relief direct into there wage ( there p60 will show this - there taxable / gross wage figure for the year will be much lower ) the taxable pay they give to tax credits will be lower because there p60 will show this change .


i hope that helps .. when i rang tax credits up the other week to re-new i told them my husband pays into a stakeholder pension .. when he asked for our income he wanted me to give them my husbands wage with his pension payments already deducted ( i never knew at the time ) , at first i gave him my husbands gross / taxable pay , then my carers allowance figure .. then i said what about my husbands pension payments .. he said i should of given him my husbands gross/taxable pay with his pension payments already deducted .. so i gave him my husbands pension payments figure then he deducted that from my husbands taxable / gross wage figure , but in the past i've always thought you have to give them my husbands gross / taxable pay - which shows on his p60 , then give them my husbands stakeholder gross pension payments separate then they deduct them . not the case .. tell them your partner pays into a pension yes .. but give them your partners gross wage figure with the gross pension payments already deducted ( which will be a lower figure than it is on your p60 ) .. i hope you can understand me , i do waffle on ...

see you from kerry .

Camper_2

Thanks kerryallc71.

I am 100% sure now they should allow my personal pension contributions paid from my net pay. When I phoned up, the gentleman didn't even ask about my Pension and Gift Aid Payments. Only my Gross Pay from My P60 and whether I had any other income or self employment, wifes pay etc. He was then about to finalise the claim when I said that I made pension and gift aid contributions. He asked if they were paid through my employer and I said that they were. He then said he could not allow the deduction. I tried to explain that it was from my net pay but he still wouldn't accept it because it goes through my employer but if I paid them out of my own pocket that would have been fine! In the end I agreed to finalise the claim because I thought he must be right. Wish I hadn't finalised it now and rang back with adjusted gross pay figures as now I have had to write a letter to the tax credits office and I expect it will take ages to get sorted out. I think it all depends too on who you speak to. Some are more clued up than others and the tax credit notes really are not clear at all.