Tax Credits

restless6

I receive WTC and CTC and I work 2 jobs as a single parent.
I would rather earn more so I don't need these top ups.
I am currently applying for more jobs and hopefully I will go above the WTC threshold next year anyway.

I don't understand why you would reduce hours and want to stay in the benefit trap rather than try and get out of it?

So your kids might get a few free dinners at school, but what about when those kids have grown up and left home. How are you going to live well on your low wage once the tax credits etc have all gone?

wotsthat

All he's doing by the way is delaying gratification by prioritising pension saving. The government are providing an incentive to do this and it's open to anyone. The country wouldn't be screwed if everyone did this - the rules would just be changed sharpish.

I wish more people did it and it was well publicised. It might, although I doubt it, remind politicians that giving money away is a piece of !!!! but trying to reduce the gift is a nightmare.

michaels

The govt made the rules that pension contributions are not considered when calculating tax credits not me. I presume they did this on purpose as they could just as easily said that pension contributions did count as income for tax credits purposes. Upper rate tax payers making pension contributions are reducing govt income by much more than I am - is what they are doing morally worse therefore?

gadgetmind

wotsthat wrote: »

All he's doing by the way is delaying gratification by prioritising pension saving.

Well quite. There are increasingly draconian and complex rules to prevent high earners doing this, but Michaels seems to be in the sweet spot.

gadgetmind

michaels wrote: »

Upper rate tax payers

No such tax, no such animal!

Higher rate tax = 40% (plus NI), additional rate tax = 45% (yadda) and reduction in Annual Allowance means that pension contributions are very much castrated for many in these bands.

michaels

gadgetmind wrote: »

No such tax, no such animal!

Higher rate tax = 40% (plus NI), additional rate tax = 45% (yadda) and reduction in Annual Allowance means that pension contributions are very much castrated for many in these bands.

Soz meant additional rate. There are annual caps but with 3 year roll over of this I suspect someone could 'save' an eye-watering amount of tax in one year if they hadn't contributed in the 3 previous years, 45% additional rate+2% NI+13.8% employers NI if done through salary sacrifice with an agreeable employer on 50k+50k+40k+40k.....

zagfles

michaels wrote: »

The govt made the rules that pension contributions are not considered when calculating tax credits not me. I presume they did this on purpose as they could just as easily said that pension contributions did count as income for tax credits purposes. Upper rate tax payers making pension contributions are reducing govt income by much more than I am - is what they are doing morally worse therefore?

Exactly - using pension contributions to lower your income for tax credits purposes isn't some obscure loophole, it's a specifically allowed for deduction, just like it is for tax.

It's no more immoral to use pension contributions to increase tax credits than it is to use them to decrease tax. If people don't like it, and many don't, then complain about the rules not about the people making use of the rules for the purpose they were designed.

There used to be very strict limits on the amount of income you could put into a pension, generally 15-20% of income or so depending on age/scheme type, but in 2006 the Labour govt decided to remove the limits almost completely, and allow people to put 100% of their income into pensions if they want with a massive annual allowance of over £200k (now reduced to £40k). If the govt didn't want people to take advantage of this, why did they specifically legislate to allow it?

Tax credits followed the tax rules and allowed full pension deductions. Some accountants were apparently sued for not telling high earning clients of the opportunity to get tax credits!!

This opportunity will come to an end soon, possibly with flat-rate tax relief on pensions, also with UC which has capital rules so someone with significant savings wouldn't be able to claim regardless of income.

gadgetmind

michaels wrote: »

with 3 year roll over of this I suspect someone could 'save' an eye-watering amount of tax in one year

True, but as you say, this relies on having contributing less than the allowance in previous years. To complicate this, the allowance for these year sometimes changed during the year, and the allowance for carry forward sometimes bore no relation to the actual allowance during the year.

Confused yet?

I've been maintaining a spreadsheet throughout these mad changes and it's getting gnarly, deeply gnarly. I've written 50k lines programs in pure assembler in the past, but this spreadsheet ..

kinger101

zagfles wrote: »

Exactly - using pension contributions to lower your income for tax credits purposes isn't some obscure loophole, it's a specifically allowed for deduction, just like it is for tax.

It's no more immoral to use pension contributions to increase tax credits than it is to use them to decrease tax. If people don't like it, and many don't, then complain about the rules not about the people making use of the rules for the purpose they were designed.

You're confusing morality with legality. But I agree, it's up to the dimwits who wrote the rules to change them. A cap should be placed on the extent to which pension contributions can be used to reduce pay for the purpose of tax credits.

I'm of the opinion tax credits are mainly about the sense of entitlement. I remember both my parents working. And them having two jobs when interest rates hit 15%.

cells

Am I correct in thinking you can put all your income into a pension and then go retire in a low/no tax heaven and pay low/no tax there?