Buying Additional Pension & CTC/WTC

princessdon

I don't get Tax Credits but I do get 40% rebate in tax so they are in affect paying 40% of my pension. I used to feel guilty but don't as I feel we get nothing else and still pay a lot of tax.

gardenia101

Thank you all for your comments - plenty to think about there! I can see now that I probably shouldn't feel guilty as I expect the SRA will rise to 80 long before I retire....

gardenia101

gardenia101 wrote: »

I'd been hoping to buy some extra pension entitlement in my local government pension in the form of Additional Voluntary Payments. As I understand it, this it taken directly from my gross salary, just like the "usual" pension contribution I make each month.

After years of self employment at a low'ish wage, I'd like to try & catch up now I have a decent pension scheme to pay into.

I've had lots of good advice on the pensions board, but someone there suggested I check what would happen with my claim for CTC & WTC - expecting my renewal any day.

As I've never paid any additional pension payments before I haven't a clue - I'm assuming that as my gross salary itself hasn't changed much (very small pay rise) & I'm choosing to spend extra on my pension rather than take that money home, then my TC won't be affected. Is this right (sounds far too simple for TC :rotfl:).

I hope I've explained that OK - I did have a search but couldn't find much info.... Sure it is out there, somewhere.

Thanks in advance.

zagfles wrote: »

Paying extra pension contributions will lower your taxable (P60) income and so will usually increase your tax credits. It's generally a good idea to pay extra into a pension if you're claming tax credits (if you can afford it) as you get tax relief plus extra tax credits.

Of course when you get paid the pension you'll get taxed on it (other than the 25% TFLS) and it'll count as income for the purposes of any means tested benefits.

Finally received by TC renewal pack (having to take into account the extra 8 weeks it takes them to provide it in large print is somewhat annoying :mad: but that is a whole other thread!) so I called to renew as there has been a mistake on my form.

All fine until I ask them about how these extra ARCs will affect my TC. They tell me that they will not take them into account & that for TC purposes my employment income will remain the same, even though I'll actually receive a lot less salary each month.

Has there been a recent change as if I understood this thread correctly it seemed like these extra ARCs could be taken into account?

Looking at form TC825 it talks about deducting contributions paid into a personal pension, but the lady on their helpline says the extra contributions don't "count" as they are not going into a personal pension but into my employers pension scheme.

The renewal info I received does state not to deduct any pension contributions paid through your employer (which mine are) but to deduct contributions to free-standing AVCs & stakeholder pension plans.

I'm a little confused about the difference between such schemes for TC purposes.

Any ideas, anyone? Thanks in advance.

zagfles

The lady on the helpline was talking rubbish. The reason for the advice telling you not to deduct pension contributions made through your employer is that pension contributions are (in most cases) already deducted from your taxable/P60 income. So they don't want you to deduct them twice.

If you look at your "gross taxable pay to date" on your payslip and compare one month's to the next, you should see that this figure increases by your pay inc overtime etc minus all your pension contributions.

This figure, at the end of the tax year, is what appears on your P60 and is the figure tax credits will want. And this figure will be reduced by your ARCs.

So if you can provide them with an estimate of this figure, they should base tax credits on that (taking into account the disregard mentioned above).

gardenia101

zagfles wrote: »

The lady on the helpline was talking rubbish. The reason for the advice telling you not to deduct pension contributions made through your employer is that pension contributions are (in most cases) already deducted from your taxable/P60 income. So they don't want you to deduct them twice.

If you look at your "gross taxable pay to date" on your payslip and compare one month's to the next, you should see that this figure increases by your pay inc overtime etc minus all your pension contributions.

This figure, at the end of the tax year, is what appears on your P60 and is the figure tax credits will want. And this figure will be reduced by your ARCs.

So if you can provide them with an estimate of this figure, they should base tax credits on that (taking into account the disregard mentioned above).

Thank you again Zagfles - that is what I thought TC would say after your last help (& others).

So I rang them again - no joy. I tried explaining how my P60 figure would be less because of these ARCs but was told, again, that my TC wouldn't increase because it was my choice to pay these ARCs. I asked to be put through to a supervisor, but none were available, so I then asked what would happen at the renewal of the end of this tax year - if my P60 earnings were less than they were last year by e.g. £6K (not that I'm paying that much in ARCs :rotfl:) would I then get any extra TC? Yes, she said....

Sadly we were cut short at that point as my DS fell off the chair & pulled my hot tea with him.... He's fine, but I'm not looking forward to my next call to TC to ask them about it all again.

zagfles

gardenia101 wrote: »

Thank you again Zagfles - that is what I thought TC would say after your last help (& others).

So I rang them again - no joy. I tried explaining how my P60 figure would be less because of these ARCs but was told, again, that my TC wouldn't increase because it was my choice to pay these ARCs. I asked to be put through to a supervisor, but none were available, so I then asked what would happen at the renewal of the end of this tax year - if my P60 earnings were less than they were last year by e.g. £6K (not that I'm paying that much in ARCs :rotfl:) would I then get any extra TC? Yes, she said....

Sadly we were cut short at that point as my DS fell off the chair & pulled my hot tea with him.... He's fine, but I'm not looking forward to my next call to TC to ask them about it all again.

So she contradicted herself! Probably best to write to them and simply state that due to paying extra into your workplace pension, your estimated P60 income for this tax year will be xxxx and could they use this estimate for your payments this year please. They are less likely to get things wrong if you write to them.

BUT it might not be worth bothering - if the ARCs are less than £2500 it won't increase your tax credits this year anyway as per IQ's post, you won't see the increase till next year.

If it's only a bit over £2500 it won't increase them much, and you won't lose out by not telling them, when you do the renewal quoting your P60 income if it's gone down over £2500 they'll pay you a lump sum.

Glad your son is OK after his fall!

xylophone

http://www.hmrc.gov.uk/taxcredits/start/claiming/income-hours/employment-income.htm might help.

gardenia101

zagfles wrote: »

So she contradicted herself! Probably best to write to them and simply state that due to paying extra into your workplace pension, your estimated P60 income for this tax year will be xxxx and could they use this estimate for your payments this year please. They are less likely to get things wrong if you write to them.

BUT it might not be worth bothering - if the ARCs are less than £2500 it won't increase your tax credits this year anyway as per IQ's post, you won't see the increase till next year.

If it's only a bit over £2500 it won't increase them much, and you won't lose out by not telling them, when you do the renewal quoting your P60 income if it's gone down over £2500 they'll pay you a lump sum.

Glad your son is OK after his fall!

He is pretty indestructible thanks, although he does like to test himself regularly :rotfl:

I rang again today to end my son's childcare payments, & asked again about the ARCs & reduced P60 income. The plot thickens as I now have to send in a copy of my payslip to see if these ARCs will be allowed :huh:

I spoke to a very helpful lady who said they had "bands" to consider if pension payments can be allowed, but this lady did understand what I was saying about my P60 figure being reduced. When I send in my payslip & letter then I should receive a reply detailing why they cannot be allowed (if they can't).

I did ask if I could wait until the end of this year & just give in my P60 figure on my renewal (as this is what TC ask for isn't it?) but apparently I can't. Makes me wonder when is a P60 figure not a P60 figure?

Has anyone else who pays ARCS via their employer had to provide payslips? I'm happy to provide them with the info, but I haven't yet found anything in TC notes that says you have to do this (or about pension contribution bands) so I wonder what other people do?

Thanks in advance - bit of a saga here

[Deleted User]

I always send them a copy of the working sheet and they accept this.

When I renew over the telephone, I'm investigated and refused, then I have to do the above.

Once I did all of the above and still failed, but with the support of IQ from this forum I appealed and WON!

I once thought that HMRC must always be right. Then I realised most of the time they are wrong and break their own rules.

gardenia101

The saga continues - I sent my last 3 months payslips proving how much I was paying as ARCs, last years P60 & a letter explaining my situation back in July.....

I had a new award notice for 13/14 & another final award for 12/13 where they changed my salary figure to my P60 figure, ignoring my figure I'd provided which took some gift aid payments into account (therefore lowering my salary).

So I 'phoned the helpline to check I was still allowed to take off GA (which I am ) & asked about the ARCs. Apparently it takes a month from receiving my letter to it getting looked at, even though the correct department are supposed to make a decision in 3 weeks. Not sure how that policy is working....

As TC own deadline has been breached, my query has been escalated & I should have received a reply within 4 weeks. Which I haven't, so I'm still none the wiser.

So I'll sit on it for a while longer as I'm losing the will due to the different advice given each time I ring the helpline, & just hope I get a reply before my renewal pack arrives :rotfl:.