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bigduckontax, Accountant
Category: Tax
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Hi, we get child tax credit and I have a temporary part time

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Hi, we get child tax credit and I have a temporary part time job which will push us over £30k threshold (didnt realise this until yesterday). I will only earn £400 this year and think I stand to lose £2,00 at least in tax credit. Can I counteract this by paying into a pension or spending money on childcare costs?
Or is the payment graduated? Looking at the tax offce website, it looks like there is a cut of with steep drop at income of £30k for family with two children for child taxcredit. Thanks.
Hello, I'm Keith and happy to help you with your question.
If you are in receipt of tax credits you are required to notify and changes in your situation within 30 days. I would urge to to write to the Tax Credit office in Preston immediately explaining the increases in your emoluments. Your position can then be adjusted speedily precluding future corrections of over issues of the tax credits at the year's end.
Personally, I would never advise trying to talk to HMRC by telephone. As you have found delays can be interminable and there is always the possibility of what you are trying to communicate being misunderstood also.
I do hope I have pointed the way forward for you; it will only cost you a second class stamp.
Customer: replied 3 years ago.

Hi, what I am asking is if I can offset the £400 I have earned in some way by for example paying into a pension or paying childcare costs?

I am so sorry, I omitted that part of your question. Yes, you can reduce your tax exposure by making pension contributions. These, including any made by your employer, may not exceed 100% of salary nor 40K in the current tax year. Such payments are part of your income tax computation.
Your income for calculating tax credits is reduced by gross pension contributions not paid from your salary. For full information on what to declare please have a look at UK Government web site
You will see that there are lots of expenses which can be deducted, so please have a good look.
Customer: replied 3 years ago.

Sorry, I am not a tax expert and am asking for an answer in simple terms. I have looked again and again at the tax office website and it doesn't answer my question above, that is why I have contacted this site. - I am, to put it very simply, looking to see if I can reduce our joint income by the £400 I have inadvertantly pushed us over the limit by. If so, how? For example, if I was to set up a pension and pay £400 (equal to the amount I have earned this year) will that cut my taxable earnings to nil? Or, if I were to pay £400 in childcare costs? Or is there anything else that is a factor that I should be thinking about?

Child care costs don't count so you can discount them altogether. However, pension contributions either to your own private pension plan of by means of Additional Voluntary Contributions to your employer's scheme do.

Please have a gander at the Government web site to which I have drawn your attention. It sets out in full detail the amounts which can be deducted from your earnings for a tax credit application.

I do hope I have covered all the points raised.

Customer: replied 3 years ago.

Ok, that second section that you have suggested I have a gander at is very useful - thanks. I hadn't spotted that before. Actually, my husband already pays into a private pension (£100 a month) and we have never declared (or deducted it before) - we didn't realise we could, so this should cover the difference. To check I have understood correctly, any amount that we (my husband or I) pay into a private pension scheme (as long as it doesn't exceed £40k or salary etc) can be taken off the income we declare as household income on the form we fill in for child tax credit purposes? Hoping I have understood correctly.....

The 40K limit is an income tax rule, not a tax credit rule.
Tell the TCO that your earlier years claims have all been wrong as you failed to deduct those pension contributions. They may well revise earlier year positions, they can only say no.
You now seem to have it to a T, yes you do deduct those costs and maybe many more too. I have claimed tax credits myself years ago, what a palava!
Please be so kind as to rate me before you leave the Just Answer site.
Customer: replied 3 years ago.

Yes, I will give you a positive rating, as soon as we sign off (hopefully after this email). There is however one last part of my query that I would like clarification on. That is the award itself. I can not work out from tax office website if it is staggered in chunks or changes to reflect smaller increases or decreases in household income - that is to say, was I correct in assuming if our household income exceeded the £30,000, the tax credit award would drop by several thousand - or have they just chosen specific salary brackets for illustrative purposes? I haven't explained that very well, I think I am asking would we really lose in excess of £2,000 as a result of tipping over the £30,000 by a few hundred or would it be a lesser amount to reflect the fact we are just over the threshold (ie have I been worrying about nothing?!)

If you have only one child the rate does drop dramatically if your emoluments exceed 30K. However, if you have two children the drop is far less severe and the big one is not until 40K is exceeded.
Customer: replied 3 years ago.


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