tax credit and pension

iammumtoone

I have a NEST pension, who as I understand it claim the tax back themselves so the amount comes off my payslip after the taxable amount (gross).

Do I need to tell tax credit my pension contributions?

I put some figures in a benefits calculator and it didn't make any difference to the award.

However if the pension payments were taken before my tax was paid by my employer I would have a lower annual net salary for tax credits.

xylophone

As you say, NEST operates "relief at source".

https://www.entitledto.co.uk/help/tax-credit-pension-contributions

You pay Income Tax on your earnings before any pension contribution, but the pension provider claims tax back from the government at the basic rate of 20 per cent. In practice, this means that for every £1 you pay into your pension you end up with £1.25 in your pension pot, so the amount to enter in the calculator is your net contribution multiplied by 1.25 (if you pay tax at the basic rate).

xylophone

See also

https://www.gov.uk/workplace-pensions/what-you-your-employer-and-the-government-pay

iammumtoone

Thanks I will ring tax credits and let them know my plans.

As a side note I am wondering if it will be worth it as UC is coming to my area in a few months, I don't think I will qualify for that.

Alice_Holt

Unless you have a change of circumstances which migrates you across to UC, you should remain on legacy benefits until the managed migration stage (some years away).

This table lists changes which will result in natural migration from the legacy benefit to UC:
https://www.welfare-benefits-unit.org.uk/wp-content/uploads/2016/03/What-triggers-a-claim-for-Universal-Credit-in-a-full-service-area.pdf

When UC is introduced into an area, it is for new claimants (plus those who experience a C of C covered in the table above).

Hopefully you will be able to remain on TC (which does not have capital / savings limits of UC).

iammumtoone

thank you Alice you have just answered my question for another thread as well.

Do TC only take the into account the amount of pension what I plan/hope to contribute monthly?

I also plan/hope to make add hock payments to my pension if and when I can. Will these need to be declared at the end of the tax year or will they not want to know about those?