Tax credits & 100% pension contributions

justwhat

Last year my PAYE/SE income estimate for Tax credits was aprox. 7k ish. However actual earnings was just under tax threshold( aprox £13880). Most of my  earnings was placed into a pension. 
 The bulk of  contribution was done in January. 

This Tax year i intend to do the same, However i estimate there will be £0 SE income and 19k+ PAYE with max pension contribution.

So.... What should be my estimate for Tax credits be £4750? Or should the estimate be 19k? (but that would give a nil award?)

Do i also get to estimate me pension contributions?

Dazed_and_C0nfused

This Tax year i intend to do the same, However i estimate there will be £0 SE income and 19k+ PAYE with max pension contribution.

Not sure what you actually mean by this.

£19k after taking into account pension contributions?

Or £19k before an unspecified amount of pension contributions?

justwhat

Dazed_and_C0nfused said:

This Tax year i intend to do the same, However i estimate there will be £0 SE income and 19k+ PAYE with max pension contribution.

Not sure what you actually mean by this.

£19k after taking into account pension contributions?

Or £19k before an unspecified amount of pension contributions?

i will get 19k via PAYE and place the maximum i can in my pension to gain tax relief.(probably as 2 lump sums during the year)

So yes "£19k before an unspecified amount of pension contributions?"

Alice_Holt

Don't fully understand your question - but this link should give you the answer about your Tax Credits calculation.

https://revenuebenefits.org.uk/tax-credits/guidance/how-do-tax-credits-work/what-is-income/calculating-tax-credits-income/

justwhat

Alice_Holt said:

Don't fully understand your question - but this link should give you the answer about your Tax Credits calculation.

https://revenuebenefits.org.uk/tax-credits/guidance/how-do-tax-credits-work/what-is-income/calculating-tax-credits-income/

Thanks. I understand the calculation, But was unsure how it is entered on the renewal form. My tax credits previously have been based on estimates from SE with no pension contributions.

i did search for the copy of the renewal form online, but could not locate one. 

spaniel101

I pay 100% gross (80%+20% tax relief) PAYE into a SIPP each year.

Repeated method each year:

*Last week March each year - contact HMRC to confirm Taxable earnings + SIPP payments (& Carers Allowance) for year ended
*Await first TC payment of new financial year
*Last week of April - Go onto HMRC App, Tax Credits, 'Change Estimated hours/Income' and I always enter £1 estimated for the current year.

Once formal 'Renewal Notice' arrives end April/May (you have to wait for this), I complete the following calculation form TC825 below, return via post to HMRC Tax Credits, along with a copy of my P60 & SIPP statement showing contributions for the year (100% P60 value).   

You can at the same time then complete/confirm renewal on line (after you have received it).   If there are 'no changes to be made' (which there shouldn't be as remember you updated them end of March)  they usually claim 'you do not need to do anything' - but I always send the above with this TC825 form, for absolute clarity.
  
TC825 - Working sheet for tax credits relief (publishing.service.gov.uk)


There was only one year I had a problem of late whereby it was sent through for 'Mandatory Reconsideration'.   Still awaiting outcome in the September, but one phone call and it was very transparent to the call handler that it had been sent for MR my mistake, and she kindly rectified my TC payments there and then (appeared on the App the following day).    Likely I just got someone initially who wasn't familiar with the process.


Usually, once they receive the above, Tax Credit payments are rectified June/July and renewal completed (8-12wks).   You can follow the 'Progress' of it on the App/online PTA.

justwhat

i have SE and PAYE income. DWP system does not like putting £0 for PAYE. So had a call back. They changed PAYE to £1. Was told they may need proof i paid into a pension.(i never included any proof with renewal)

spaniel101

I assume by DWP, you mean HMRC Tax Credits office ?

Yes, I always put £1 for estimated income for the year and at renewal, even if its 26p they will round it up.

They can see on their systems what pension contributions you have made for the year which (including Tax Relief received), but depending on who you get, the left hand doesn't always talk to the right hand.   Hence I always like to post a copy of my Annual Pension Contribution statement and P60 with renewal form, that way you hope its obvious.

justwhat

spaniel101 said:

I assume by DWP, you mean HMRC Tax Credits office ?

Yes, I always put £1 for estimated income for the year and at renewal, even if its 26p they will round it up.

They can see on their systems what pension contributions you have made for the year which (including Tax Relief received), but depending on who you get, the left hand doesn't always talk to the right hand.   Hence I always like to post a copy of my Annual Pension Contribution statement and P60 with renewal form, that way you hope its obvious.

yes HMRC TC office. 
I was manually depositing lump sums into pension and also contributed via works pension. So cannot be seen on P60.(relief at source).
They should know the P60 figure anyway....surely/hopefully lol 

New company i have started working for has a net pay pension scheme. So P60 will look a little different(i think).

Icequeen1

justwhat said:

Alice_Holt said:

Don't fully understand your question - but this link should give you the answer about your Tax Credits calculation.

https://revenuebenefits.org.uk/tax-credits/guidance/how-do-tax-credits-work/what-is-income/calculating-tax-credits-income/

Thanks. I understand the calculation, But was unsure how it is entered on the renewal form. My tax credits previously have been based on estimates from SE with no pension contributions.

i did search for the copy of the renewal form online, but could not locate one. 

You said you are unsure how it is entered on the renewal form - are you sure you are using in the right year? The renewal form is asking you to give your income for 22/23 tax year. If you don't know it yet, for example because you are self-employed and have not finalised your accounts, then you give an estimate and confirm the actual figure by 31 Jan 24. 

In your first post, you said the 19k was in this tax year - that isn't relevant for your renewal form and shouldn't be entered. As far as I am aware, there is no box asking you to estimate your income for the current tax year?

In other words, you should never need to estimate pension contributions when filling in the renewal form because you will have already made any pension contributions that can be deducted. 

justwhat

Icequeen1 said:

You said you are unsure how it is entered on the renewal form - are you sure you are using in the right year? The renewal form is asking you to give your income for 22/23 tax year. If you don't know it yet, for example because you are self-employed and have not finalised your accounts, then you give an estimate and confirm the actual figure by 31 Jan 24. 

In your first post, you said the 19k was in this tax year - that isn't relevant for your renewal form and shouldn't be entered. As far as I am aware, there is no box asking you to estimate your income for the current tax year?

In other words, you should never need to estimate pension contributions when filling in the renewal form because you will have already made any pension contributions that can be deducted. 

I am SE, so earnings are estimated then finalized. The following years estimate is based on the previous year unless i update them otherwise.(this is how it has always worked for my Self employment). My SE is a partnership so earnings can fluctuate due to this also.

i need to estimate/consider 2023/2024 pension contributions , otherwise i will not be entitled to Tax credits.

So my aprox. income from SE/PAYE this year will be 24k with 100% pension contributions. Income for tax credit purposes will be near nil/negligible. At moment pension contributions deposited into pot in lump sums as well as from my pay. i may have to change this to lump sum monthly payments next year.

Its more complicated than that as i am PAYE/SE and have investment interest.