WTC/CTC and personal pension contribution help

art200380

I want to apply for WTC's and CTC's and have a query regarding pension contributions. I am not interested in a debate regarding the morals of this. If I use the following example;

Gross Pay for 2016/17 is £30k but I want to pay £15k in to my pension during the tax year. This will reduce my income to £15k for the purposes of calculating the WTC and CTC.

I intend to make a WTC/CTC claim but do not wish to make the personal pension contribution until later on in the 2016/17 tax year - is this ok? Could I make the pension contribution direct to my pension provider as late as 31/3/17? Do I send the pension provider a cheque for 80% of the £15k contribution on the basis that they will recover the balance from HMRC?

I have posted a similar query in the pension forum as wasn't sure which one was best. Thanks in advance.

Darksparkle

Doesn't matter when in the tax year you do it for tax credit purposes.

Can't help from the tax side though.

art200380

Thanks - that's what I thought reading through the HMRC literature.

I'll give the pension company a call regarding the tax side and where I have to send a cheque etc.

I'll also speak to HMRC and ask them at what point the pension payment is deemed to have been paid. I presume it's the date the pension company credit it to your pension account.

I wouldn't want to leave it too late in the tax year as well thinking about it, because I would hate for their to be a delay at the pension company end and it not get credited until after 6 April 2017 and then it completely mess up my 2016-17 calculation.

FBaby

Bring in universal credit asap please!

zagfles

Yes you pay in 80% of the gross amount, so you pay £12k and the pension company reclaims £3k from HMRC. You can then knock the £15k off your household income for tax credits. Google TC825.

Be aware of the £2500 income fall disregard though, for instance if your income (after pension conts etc) last tax year was £30k and this year is £15k, your tax credits this year will be based on an income of £17,500.

Also expect some hassle on renewal. There is nowhere on the online or paper renewal to declare that you have deducted pension contributions. So you'll likely get a letter almost accusing you of fraud, saying something like "you declared £15k, RTI says you earned £30k, we don't believe you, we believe RTI and will use that", and they may finalise on £30k and you have to issue a "mandatory reconsideration", sending them the evidence of your pension contributions.

Darksparkle

zagfles wrote: »

Also expect some hassle on renewal. There is nowhere on the online or paper renewal to declare that you have deducted pension contributions. So you'll likely get a letter almost accusing you of fraud, saying something like "you declared £15k, RTI says you earned £30k, we don't believe you, we believe RTI and will use that", and they may finalise on £30k and you have to issue a "mandatory reconsideration", sending them the evidence of your pension contributions.

Good point. In these situations it's sometimes better to renew by phone so you can explain, they can override system errors and leave a note on system. Doesn't always help but better than not being able to explain by form or online.

art200380

Thanks and some good pointers.

I might pre-empt them with a letter in March 2017 and evidence of my pension contribution, to avoid their threats.

With regards to the income fall disregard, staying with the same numbers....so they calculate 2016/17 based on £17,500 but after the end of the 2016/17 tax year do they re-calculate and pay over the difference of what they should have paid? If not, would I be better stating that my 2016/17 earnings were going to be £12,500 knowing that they would really be £15,000 to account for the disregard?

Darksparkle

art200380 wrote: »

Thanks and some good pointers.

I might pre-empt them with a letter in March 2017 and evidence of my pension contribution, to avoid their threats.

With regards to the income fall disregard, staying with the same numbers....so they calculate 2016/17 based on £17,500 but after the end of the 2016/17 tax year do they re-calculate and pay over the difference of what they should have paid? If not, would I be better stating that my 2016/17 earnings were going to be £12,500 knowing that they would really be £15,000 to account for the disregard?

To be honest a pre-emptive letter probably won't help.

If in 2015/16 your income was £30,000 and 2016/17 £15,000 your claim would be based On £17,500. It won't be based on £15,000 because of the disregard.

art200380

Another question re. the CTC element.....our daughter goes to Childcare 3 days per week. For April-June 2016 she went to a nursery which was £750 per month and from July onwards she has been with a childminder at a cost of £550 per month.

Which figure do we input for the childcare costs or do I calculate the blended average for the 2016-17 year? (I can't find anything on the HMRC website regarding this query or a similar one)

Darksparkle

art200380 wrote: »

Another question re. the CTC element.....our daughter goes to Childcare 3 days per week. For April-June 2016 she went to a nursery which was £750 per month and from July onwards she has been with a childminder at a cost of £550 per month.

Which figure do we input for the childcare costs or do I calculate the blended average for the 2016-17 year? (I can't find anything on the HMRC website regarding this query or a similar one)

It would be your costs at the time of claiming. You can't give the nursery details if no longer using it.

The form shows it asks for the costs for each provider - https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/504819/TC600_Notes_10_15_v2.1.pdf

It's too late to claim for April-June. You can only backdate the claim for one month from the date they receive your completed form.

zagfles

FBaby wrote: »

Bring in universal credit asap please!

Pension contributions are deductible in UC too you know!