Question about pension contribution when claiming Working Tax Credits

xxxpinkladyxxx

We claim Working Tax Credits but I have never deducted my pension contribution from my annual earnings. It says on their letter (they think they've overpaid us which I now strongly suspect they have), that you can take off certain expenses like personal pension contributions but it goes on to say "this does not include any contributions paid through your employer". Now I know that my employer pays a certain amount into my pension as well but the £9 a month I pay is from my money - but it is paid by my company, just deducted off my payslip. So can I not take this off my annual earnings?

Caz3121

you would deduct the amount that you pay personally from your income to your pension, not the amount your employer pays to your person
Think of it as if you did not have a pension - you would have the £9 per month but you would not have the employers contribution

xxxpinkladyxxx

Thanks, that's what I thought, but the way they word it is "this does not include any contributions paid through your employer" rather than "by your employer" which is why I wasn't sure.

Caz3121

you would deduct the £108 from your annual income. As employed, this should be reflected on your P60 and it is the P60 number that tax credits will be interested in.
Unless you or your husband were to lose your jobs I doubt you are going to avoid having an overpayment of the tax credits paid to date

Darksparkle

Whether you need to make any deductions depends on whether or not the pension is deducted before or after tax.

If deducted before tax, it's already accounted for on your P60 as the P60 only shows the taxable about.

If it's deducted after tax then you need to do it yourself.

xxxpinkladyxxx

Just looked at my payslip and I think it's deducted before tax. When I gave them my estimated earnings for this tax year, I didn't deduct my pension contributions though so I'm assuming this is still to come off.

This whole tax credit thing really throws me. I just don't get why they can't work on what you earned last year and that alone. It would literally be impossible to predict at the beginning of any year what my husband will earn.

Caz3121

xxxpinkladyxxx wrote: »

J
This whole tax credit thing really throws me. I just don't get why they can't work on what you earned last year and that alone. It would literally be impossible to predict at the beginning of any year what my husband will earn.

the benefit is to top up the income in the current year and the previous years income is used as a starting point as a % of claims will be within -£2.5k or +£5k over of the previous income so the awards will be correct. The issues are where there is a bigger difference so when you report changes through the year they would update the claim to minimise any overpayment. In the case of uncertain over totals you need to look at the basic salaries and estimate the overtime etc. It is usually better to overestimate to avoid any further overpayment

It would not make sense using the previous years income to finalise the claim as it would result in receiving the help at the wrong time
Year 1 income £10k
Year 2 income £50k - claiming tax credits based on earning £10k (don't need it)
Year 3 income £10k no help (when you need it) as earned £50k last year

Darksparkle

To be honest deducting £108 from your yearly income really wouldn't make that much difference, about £44 for the whole year.

Either way it will resolve itself when you renew with your P60.

specialboy

Is it really worth putting that little into a pension?

xxxpinkladyxxx

Every little helps. Plus my work pay in the same amount. My long-term plan is to be mortgage free by the age of 50, then buy and rent a place out for income when I've retired - which is a long way off!