tax credits and pension contributions

mustryharder99

Please could somebody out there help me with an application for tax credits? I called the tax credit office and they said they didn't know! I think I need to get this clear in my mind before calling them again.
When you declare pension contributions which are deducted from income, does this mean a work pension or just personal pension?
I know only taxable pay counts for tax credits. I earn £37k but I pay £3k salary sacrifice making my income before tax/NI £34K. I then pay a further £3k in AVC pension contributions taken out before tax. So does this mean my net income is £31K and I'll be assessed for tax credit purposes based on this?
I checked the online calculator and it looks like it, but I'm confused about whether I should declare my gross income to be £37K or £34k and if my pension contributions will reduce my income to £31k, in which case I would get something instead of nothing.
I'm a single parent so this is really important !

Darksparkle

The claim form asks for your income for the 2015/16. If employed you would find this on your P60.

If your pension is taken off before tax then it's already reflected on your P60 so that's the figure you out on the form.

If the pension is taken off after tax then you make the deduction yourself.

Didn't you get the help notes with your claim form? It tells you on there what to do.

mustryharder99

My P60 says my pay for 15/16 was £31808 and the tax deducted was £4027 but there is no mention of any pension deductions. Does this mean my gross income is £35,835 for the purpose of tax credits? Presumably this is the taxable income after I pay £3k in salary sacrifice.

My monthly payslip lists Gross Earnings of £3,147 with a salary sacrifice deduction before tax for pension of £251, leaving Total Pay of £2895 and Gross Pay for Tax of £2643.
The payslip then lists Deductions of £251 for pension AVC plus tax, NI to leave a net pay of £2043.
I am confused because I am making 2 lots of pension contributions - before and after I pay tax. Also, I don't think occupational pensions count for tax credits, only personal pensions.
I'm still stumped as to what I put down as my income. Please help!:o

Darksparkle

Tax credits is based on your taxable income, not gross income.

The P60 won't mention the pension contributions, it will tell you your taxable pay.

So as I said, if pension has been taken off before tax then it's already reflected on your taxable pay on your P60.

If you make a further contribution that's been taken off after tax or out with your wages then you deduct that yourself.

Tolly_T

Hi, you said in your first post that your AVC pension contributions were also taken out before tax. Then in a later post you said "I am making 2 lots of pension contributions - before and after I pay tax". I think you need to check this.

To me it looks like they are both pre-tax payments based on

gross pay £3,147 x 12 = £37,764
pension contributions 2 x £251 x 12 = £6,024

£37,764 - £6,024 = £31,740. Not quite £31,808 but close enough.

As Darksparkle said pre-tax pension contributions are already reflected in your taxable pay figure on your P60. You don't need to consider your pension contributions when working out your pay figure for tax credits purposes as they have already been dealt with in your P60 pay figure of £31,808. There may be other deductions to consider such as Fees and subscriptions to professional bodies or Gift Aid donations to charity. You can check these in the notes.

You asked

My P60 says my pay for 15/16 was £31808 and the tax deducted was £4027 but there is no mention of any pension deductions. Does this mean my gross income is £35,835 for the purpose of tax credits?

No. You add the pre-tax pension contributions to the P60 pay figure to get your gross pay figure, not your tax deducted figure. The P60 doesn't show pre-tax pension contributions. You can check your final payslip which probably shows Gross pay for the year and taxable pay for the year and compare this with your P60 figure. However, this isn't relevant for your tax credit return. It doesn't ask for your gross pay. You need to take £31,808 as your starting point, check if you need to deduct anything else, and ignore your pension contributions as they've already been dealt with.

Hope this helps.

mustryharder99

You're right - I just checked with Payroll and it is £31808 which is the taxable pay figure in the P60. Thanks for all your help.