Tax credits renewal figures - Pensions amount?

piratefish

Hi there,

I would really appreciate some help with this! I have just renewed our tax credits over the phone but the operator was very unsure and needed to check everything, she kept leaving me on hold and coming back, so I thought I would ask here (the renewal was put through eventually).

My husband pays into a pension through his work but he pays the same amount every week, it does not alter if he works overtime. Looking at his wage slip for week 53, the total gross pay to date is the same amount that is on his P60. The amount of pension he has paid for the year is listed below that amount, along with the NI and tax paid. Should the pension paid be deducted from his gross pay amount for tax credits purposes? The operator went away twice and eventually said that she thought not and it was not deducted.

I pay a small amount monthly into a stakeholder pension but am not in employment, I am a full time carer and receive carers allowance. She said that the pension payments I make are not deductible from my income as taxable benefits do not count as income in the same way that wages do.

Does all of that sound correct please? I just want reassurance that it was done correctly I guess as the person doing the renewal seemed so unsure of everything!

Thank you for any help

zagfles

piratefish wrote: »

Hi there,

I would really appreciate some help with this! I have just renewed our tax credits over the phone but the operator was very unsure and needed to check everything, she kept leaving me on hold and coming back, so I thought I would ask here (the renewal was put through eventually).

My husband pays into a pension through his work but he pays the same amount every week, it does not alter if he works overtime. Looking at his wage slip for week 53, the total gross pay to date is the same amount that is on his P60. The amount of pension he has paid for the year is listed below that amount, along with the NI and tax paid. Should the pension paid be deducted from his gross pay amount for tax credits purposes? The operator went away twice and eventually said that she thought not and it was not deducted.

The answer is usually no because it is usually already deducted. You need to work out whether the pension conts are deducted from the "gross pay to date", payslips can sometimes be very misleading. Compare two consecutive payslips and see how the "gross/taxable pay to date" changes between them, is it pay+overtime etc, or is it pay+overtime-pension conts. If pension conts are already deducted then obviously don't deduct them again!

I pay a small amount monthly into a stakeholder pension but am not in employment, I am a full time carer and receive carers allowance. She said that the pension payments I make are not deductible from my income as taxable benefits do not count as income in the same way that wages do.

I'm pretty sure this is wrong, pension conts you make can be deducted from your joint income AIUI. See http://www.hmrc.gov.uk/manuals/tctmanual/TCTM04003.htm and google TC825 worksheet which has an example of deductions from one partner made against the income of another. I'd suggest you pursue this, perhaps write to them to make sure.

Icequeen99

zagfles wrote: »

The answer is usually no because it is usually already deducted. You need to work out whether the pension conts are deducted from the "gross pay to date", payslips can sometimes be very misleading. Compare two consecutive payslips and see how the "gross/taxable pay to date" changes between them, is it pay+overtime etc, or is it pay+overtime-pension conts. If pension conts are already deducted then obviously don't deduct them again!

I'm pretty sure this is wrong, pension conts you make can be deducted from your joint income AIUI. See http://www.hmrc.gov.uk/manuals/tctmanual/TCTM04003.htm and google TC825 worksheet which has an example of deductions from one partner made against the income of another. I'd suggest you pursue this, perhaps write to them to make sure.

Agree with everything Zagfles has said. The second part is definitely incorrect, but I have a vague recollection that it could be something to do with how they enter the figures on the system and that there isn't a separate box for pension contributions but that it is taken off the employment income figure. I could be wrong on that.

As Zagfles notes, the pension contributions are a deduction from total income. You will need to ring them back and refer to the link given. If that doesn't work, appeal when you get your award notice.

IQ

piratefish

Many thanks for such comprehensive replies. I will definitely follow this up, I am glad I asked on here!

piratefish

Compare two consecutive payslips and see how the "gross/taxable pay to date" changes between them, is it pay+overtime etc, or is it pay+overtime-pension conts. If pension conts are already deducted then obviously don't deduct them again!

I just did this and the difference between the gross/taxable amount for 2 consecutive weeks is the exact amount of the total gross pay for the first week. Does that mean that I need to deduct the amount of pension paid from the total gross pay for tax credits purposes? His employers do make a contribution to the pension too if that makes a difference.
Thank you!

zagfles

piratefish wrote: »

I just did this and the difference between the gross/taxable amount for 2 consecutive weeks is the exact amount of the total gross pay for the first week. Does that mean that I need to deduct the amount of pension paid from the total gross pay for tax credits purposes?

Yes, unless the pension contribution is invisibly deducted - this sometimes happens if it's paid by "salary sacrifice", for instance if his wage is £200pw and he pays £10pw into the pension, this may appear on the payslip as wage of £190pw because the pension cont is already deducted.

But if eg his wage is £200pw and this shows as £200pw, and the pension cont is shown separately and deducted together with tax and NI, and the gross taxable increases by £200 from the week before, then yes he should deduct the grossed up pension contribution from his wage. His annual pension statement should show his contributions plus tax relief from HMRC, eg if it shows his contributions as £800 and £200 tax relief he should deduct £1000.

His employers do make a contribution to the pension too if that makes a difference.
Thank you!

No makes no difference. Ignore employer contributions.

princessdon

zagfles wrote: »

Yes, unless the pension contribution is invisibly deducted - this sometimes happens if it's paid by "salary sacrifice", for instance if his wage is £200pw and he pays £10pw into the pension, this may appear on the payslip as wage of £190pw because the pension cont is already deducted.

But if eg his wage is £200pw and this shows as £200pw, and the pension cont is shown separately and deducted together with tax and NI, and the gross taxable increases by £200 from the week before, then yes he should deduct the grossed up pension contribution from his wage. His annual pension statement should show his contributions plus tax relief from HMRC, eg if it shows his contributions as £800 and £200 tax relief he should deduct £1000.

No makes no difference. Ignore employer contributions.

If the employer makes conts then it is unlikely it isn't deducted at source therefore already taken into account in the p60.

piratefish

Thank you both, he is going to check at work and try to find out for sure.
I am really grateful to everyone who has helped me out so generously, it is much appreciated! :beer:

piratefish

He has asked at work and they do not understand what he is asking.

This is what he asked, 'Are my pension payments already deducted from the gross wage amount shown on the P60?'

Is that what we need to know?

The woman who is actually in charge of the payroll etc has replied that they are taxed on all earnings, then pension is taken off and you get 20% tax relief from the govt on pension payments.
She has also written out a sum showing 2012/13 Gross pay minus tax, minus NI and minus pension payments = what is received in the bank, like this:
Gross 1000
Tax -100
NI -50
Pension -100

---

= Bank 750

Obviously the figures I typed are made up, he earns slightly more per year thankfully!
But would you say that we therefore need to deduct his grossed up pension payments for 12/13 from his gross wage amount as listed on his P60 and use that as the amount for tax credits purposes? I am so confused :eek: Thank you so much for helping :A

zagfles

piratefish wrote: »

He has asked at work and they do not understand what he is asking.

This is what he asked, 'Are my pension payments already deducted from the gross wage amount shown on the P60?'

Is that what we need to know?

The woman who is actually in charge of the payroll etc has replied that they are taxed on all earnings, then pension is taken off and you get 20% tax relief from the govt on pension payments.
She has also written out a sum showing 2012/13 Gross pay minus tax, minus NI and minus pension payments = what is received in the bank, like this:
Gross 1000
Tax -100
NI -50
Pension -100

---

= Bank 750

Obviously the figures I typed are made up, he earns slightly more per year thankfully!
But would you say that we therefore need to deduct his grossed up pension payments for 12/13 from his gross wage amount as listed on his P60 and use that as the amount for tax credits purposes? I am so confused :eek: Thank you so much for helping :A

So it does sound almost certain that pension conts are taken from net pay rather than gross (ie after tax, not before), so yes he should deduct his grossed up pension contributions from his earnings. He should get an annual pension statement which should show his contributions plus tax relief claimed by the scheme. He should make sure he keeps this in case HMRC query it, and I presume he has the bolded bit above in an email, he should keep that too.

The problem is that this isn't the normal way of taking pension contributions, usually they're deducted from gross pay, and HMRC have general "simple" advice that pension payments taken from your wages shouldn't be deducted. In this case they should, so you might get hassle off HMRC when there is a mismatch between the P60 and the income you declare. If you tell them "I deducted work pension contributions" you could get a reply of "you can't do that" if you get someone who doesn't understand all this. In which case you may need to write to them with the evidence as above.

kerryallc71

Piratefish you have the same problem as me , I just wish my husbands work would deduct his pension payments from his gross wage figure and it would all be a whole lot easier , I've just renewed our tax credits on Sunday and had to explain in detail about his pension payments .

I told her that my husband does not get any tax relief in his wage packet each month , he gets the tax relief given to him on his pension payments he makes each month to the pension provider ( legal & general , stakeholder ) , we get a yearly statement through the post and if hmrc ( tax credits ) need it I would quite happily photocopy all wage slips , p60's , pension statement . His gross figure this year inc tax relief is £1'219.00 .

Just wondering what the universal credit will be like for pension payments ..