pension contributions

Hi

Does increasing my pension contribution affect my child tax credit for the purpose of calculating income?

Many thanks 

Comments

  • Yamor
    Yamor Posts: 313
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    Yes, gross pension contributions can be deducted from your income.

    However, beware if your household income would anyway be within £2.5k of last year, and the increased contribution would still leave your household income within £2.5k of last year. In that case you would only actually see any gain in the next tax year, which, with the current changeover to UC, might never happen.
  • naf123
    naf123 Posts: 1,694
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    so is it better to make a bigger contribution e.g, more than 2.5K in order to see the gain before the UC changeover?
  • Yamor
    Yamor Posts: 313
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    Possibly. Will depend very much on your precise circumstances.
    If you tell us your household income for last year, and your projected household income this year, then I could comment further. Also, what other benefits are you on?
  • naf123
    naf123 Posts: 1,694
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    Yamor -  I will send you a PM. Many thanks 
  • naf123
    naf123 Posts: 1,694
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    I just want to double check....increasing my pension contribution will not affect my gross salary on my payslip as it will show as a deduction.... but for tax credit purposes , do I put in "gross salary minus pension deduction"? 

    For example I have a student loan payments and it is deducted but I don't deduct that for tax credit purposes...
  • Yamor
    Yamor Posts: 313
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    Tax credits should indeed be gross salary minus pension.

    However, there are two types of pension schemes. One is called a 'net pay scheme' and would mean that your P60 would already have the pension contributions deducted, so you just report the P60 figure. The other is known as a 'relief at source' scheme, in which case the P60 figure will be gross of pension contributions, and you would have to deduct it before reporting it. And in this case you would actually deduct an extra 25% from the P60 figure.

    You therefore have to find out first which type of scheme yours is before reporting your income to tax credits based on your P60.
  • naf123
    naf123 Posts: 1,694
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    Thank you! In my case it's net pay , therefore should be straightforward! 

    My other query is now charity . I've given charity before and ticked the gift aid box so the charity get extra money . How does it work with deducting for the purpose of tax credit ?

    Many thanks !
  • Yamor
    Yamor Posts: 313
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    You should deduct the grossed up charity amount from your income. So, for every £100 you gave, deduct £125 from your income.

    If your income is over £50,000, you will also need to report the charity separately to HMRC for income tax purposes.
  • naf123
    naf123 Posts: 1,694
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    Thanks . Income over 50k before or after pension deductions? 
  • kaMelo
    kaMelo Posts: 2,284
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    Do you pay higher rate tax on any income?
    If not then there is nothing to report, if you do then you need to tell HMRC.
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