Tax Credits Confusion On Pensions

James123_2

Hi All!
Many, many thanks if you're able to help with the following.
My wife is faced with the possibility of being retired off on health grounds. If this does not happen, she will have her hours drastically cut. In order to keep ahead of our finances, we've visited entitled-to in so see what our position might be. HOWEVER, we're confused!!

IF my wife is retired she we will get MORE tax credits than if she were to work a few hours a week - even though her pension would be greater than her earnings. So, the question is whether pensions are treated differently for tax credits. Here are the figures:

IF PENSIONED:
Pension: £8700
My income: £6000
TAX CREDITS: £6532 (£4139 & £2393 - working and child respectively) We have one dependant

IF NOT PENSIONED:
Wife income: £6800
Own Income: £6000

Tax credits £4098 (£1704 & £2392)

HUGE THANKS for wading through this and any observations welcomed ...
James
PS ... I work 30+ hours a week!

CIS

Pensions are treated as income , the same as if your income was earned through employment.

http://www.hmrc.gov.uk/manuals/tctmanual/tctm04201.htm

James123_2

Thanks, re last post detailing that pensions were treated as general income. However, unless I'm missing something, I still don't understand why TAX CREDITS might award a higher amount for a family in working tax credits (as seems to be the case?) where an element of that income is from pensions rather than earned income.
Thanks again to one and all!
James

CIS

Try HMRC tax credit calcualtor, entitled-to seems to through up strange results HMRC will calc from today to yr whereas entitled-to gives for the full year.

http://www.taxcredits.inlandrevenue.gov.uk/qualify/WhatAreTaxCredits.aspx

In practice you should get deffinetly less tax credits with the higher income

James123_2

Thanks ... will try this one! We haven't claimed a penny in 30+ years ... so it's all new to us.

James123_2

It seems that the 'entitled to' site is hugely inaccurate. It's widely tipped by folk in the media as a reliable source of information. The HMRC site gives massively reduced figures at £1903.14 for child tax credit and only £502 for working tax - albeit as a payment over only 10 months to April. This would give a yearly figure of about £2880. However, it's a HUGE drop from the 'entitled-to' site - why is this so widely publicised - is it normally unreliable?
Thanks, as ever, for your help!!
James

CIS

Ive never been a great fan of it but this year Ive heard more complaints about inaccurate figures than Ive ever done previously.