Which Salary Figure to Provide for Tax Credits

wegle

Hi Everyone,

I'm hoping that someone might be able to confirm/deny something for me as I'm not 100% convinced that what I've been told is correct.

I rang HMRC yesterday to give them my estimated income for this year as it will be over £2500 higher than last year. They asked that I give the full gross amount, before any deductions including tax, NI and pension. I asked them to check if that was correct as in previous years I've been asked to give the taxable income figure on my P60 which is my gross salary minus my pension contributions. The advisor went away to check and confirmed that occupational pension contributions should not be deducted so I left them with my full gross salary figure.

After the phone call I did some reading/checking and I think that when the advice says not to deduct any occupational pension contributions it means not to deduct them from your taxable income figure, as they have already been deducted, as opposed to deducting them from your gross salary. I rang again today to double check if what I understood was correct or if the advice I was given yesterday was correct. The lady I spoke to today confirmed that they needed the full gross salary figure without any deductions for pension contributions.

By this point you're probably thinking "Blimey she's been told twice that this is correct, just get on with it.", but I can't shake the feeling that this is wrong. Is anyone able to confirm what HMRC have told me? Thanks.

stoozie1

I thought, like you, that occupational pension conts were NOT included.

The earnings working sheet they send out when you first complete a taxcredits application (5.3 working sheet) states that the figure to use for earnings is 'taxable pay'.

It is concerning that they have told you otherwise as I imagine there are a few of us thinking the same!

wegle

Thanks stoozie, glad to hear I've not just made this up in my head then. I've been getting so confused by it. My previous award has been based on my taxable income figure (gross minus pension). I think the confusion comes in as they don't want people deducting any pension contributions from their P60 figure as they have already been deducted, but as I'm trying to inform them of a change in expected income I don't have a P60 with the expected figure so I need to subtract my expected pension contributions from my gross salary to be able to give them an expected taxable income for this year.

I think if a few more people are able to confirm that we're right then I shall just update the figure online once the portal is back up and running. That's what I was originally going to do but because it's been unavailable all week and I don't want to keep getting over paid I rang to get it sorted.

Another possible question. If I am indeed correct and it should be my taxable income they work out my award from. Will I have problems if they base my new award on my Gross salary but when I update it to taxable income the award will not increase as the difference between those 2 figures is less than £2500? It's not a lot to some but using the calculators if they use my gross salary as opposed to taxable income I lose out on about £10 a week. Thanks again all.

Darksparkle

If you are using your P60 figure or taxable pay figure from payslip then you don't need to make any further deductions.

If using the gross figure, you need to make the deduction.

I don't really understand your last question sorry. The £2,500 disregard is when comparing the income from last year and this year. It's not used for comparing estimates to new estimates.

wegle

Thanks Darksparkle and Penitent.

Darksparkle - I realised once I posted that the £2500 disregard is about changes in actual income. Think my brain is just over fried trying to get this all sorted. Thanks for confirming regarding the pension deductions.

Penitent - Yes I think that's why there's confusion. Maybe I was using the wrong terms when speaking on the phone. I've always referred to my overall salary as my Gross salary and my taxable income as Gross salary minus pension contributions. Maybe HMRC have had a lot of problems with people double deducting so to be on the safe side they just stick to the general "do not deduct occupational pensions" advice.