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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

To claim tax credits by upping my pension contribution?

125 replies

TaxCredits · 31/08/2018 17:49

I’ve just found out that if I up my pension contribution via salary sacrifice, we would get a substantial amount of tax credits and hardly be worse off.

I’m the sole earner on 40k - 4 kids, one with a disability.

If I put 1/2 my salary into the pension, I get income tax relief, NI saved and my employer pays the full employer NI saving.

This means that I end up with around 23k in my pension per year.

In addition we would get tax credits of around £1150, which would otherwise be tapered away at 41p per pound I earn (plus tax and NI on top)

Basically doing the sums we would be around £300 per month worse off now, for 2k in my pension! Or put another way, for every 27p I give up of income I give up now, £1.13 would go into my pension.

I would be stupid NOT to do this, right? We have to save for our future and it’s totally within the rules.

OP posts:
NothingOnTellyAgain · 01/09/2018 18:03

Why?

Govt will hardly be unaware of this.

Govt likes money >> pension schemes as it's money >> shares and private companies etc

NothingOnTellyAgain · 01/09/2018 18:05

Current govt will be AOK with what the effect is >> essentially a route for public money into private companies & shareholders

You can equally avoid tax in employment by pushing money into your pension scheme - loads of well off people do this

Joe66 · 01/09/2018 18:05

Surely the assessment period is the previous tax year?

Sugarhunnyicedtea · 01/09/2018 18:18

2 working parents incur higher costs to enable them to work, unless they have no travel/childcare/subsistence costs, which would be extremely unusual.

Anyway, you've clearly made your mind up, not really much point answering your AIBU as you think you're not bu

jemihap · 01/09/2018 18:28

This is a perfect (though sadly not atypical) example of what an utterly fucked up system the whole Tax Credits thing really is.

RomanyRoots · 01/09/2018 18:32

2 working parents incur higher costs to enable them to work

That's why many stick at one job and have tc, or both work pt and receive tc.
It's too bloody expensive for both parents to work.

cloudtree · 01/09/2018 18:38

Clearly it is possible to do this since the whole point of salary sacrifice is that you give up part of your salary and so the P60 figure will show the lower salary. However I agree its absolutely appalling that it's possible. There are thousands of people struggling, the strain on public funds is massive and you are planning to get the tax payer to fund your pension.

Bluelady · 01/09/2018 18:42

As a tax payer on a fraction of your income, I'm appalled this is even possible. I rather naively it seems assumed tax credit assessment was based on gross income. I'm also quite pissed off that I'm expected to subsidise you.

GreenGrassAndClover · 01/09/2018 19:03

I realised a few years ago that things were unfair, when I overheard one of the guys on another team, explaining to his team mate, that “no he didn’t need to do overtime ( that the rest of us were doing) as he got tax credits”

I thought this had all been phased out really.

Ifailed · 01/09/2018 19:18

But disagree it's because people are lazy I mean they are lazy about politics. We get the government we deserve.

Thatsfuckingshit · 01/09/2018 19:29

Ok you do realise that 2 working people will have 2 sets of travelling costs and other expenses. Which is why it's per person. Not per household.

While your thinking would work out better for me as a single person, idint think the government should be cutting tax further to subsidise people's choice to have a sahp.

Original poster
TaxCredits · 10/12/2018 18:54

Just a quick update on this - given people on here are increasingly talking about how salaries have stagnated etc.

I've sorted this all out and it's working great - a £1130 contribution to my pension for just £270 a month less net. Incredible! I'd urge everyone to do this if they are still in a tax credit area and a similar situation.

OP posts:
Soontobe60 · 10/12/2018 19:01

That's good of you to update us on this grabby scam that you're undertaking. I'm pleased the tax payer is subsidising your lifestyle so much. Just remember, the NHS and schools are funded via tax. The less there is available as a result of people like you exploiting the system for their selfish ends, the more everyone will suffer. Let's hope you don't need the NHS or schools!

Original poster
TaxCredits · 10/12/2018 19:02

No worries at all! When interest rates are normalised and house prices drop, I'll probably stop doing it. Until then, don't hate the player.

OP posts:
BigFarmer · 10/12/2018 19:03

Lovely. Foodbanks for us scroungers but you good income earners make sure you're looked after in old age and claim a bit more now. Thank fuck I'll be dead before retirement.

BigFarmer · 10/12/2018 19:05

Until then, don't hate the player.

Hope you end up on UC. Player my eye. You're a fucking scrounger. Got plenty but take a bit more.

Original poster
TaxCredits · 10/12/2018 19:09

If we end up on UC, we will have transitional protection as I've locked in the low salary. It's not quite as lucrative but it's not too shabby.

OP posts:
Original poster
TaxCredits · 10/12/2018 19:11

And hey, this has given me an interest in accountancy. Pretty sure I've got a new career plan now if I ever need more money. 😁

OP posts:
MorningCuppa · 10/12/2018 19:28

How can it be a grabby scam if it's all legal? Genuine question, if they don't want people to do this, then they wouldn't allow it.

I'm sure your find many people doing this, and before you ask, no I'm not one of them, we don't get tax credits.

CloserIAm2Fine · 10/12/2018 19:36

Despicable behaviour and disgusting loophole

I hope it comes back to bite you and your scrounger friends on the ass

ISdads · 10/12/2018 19:45

I put £600 a month in, on top of normal contributions, and get a fair whack of that back in tax credits. It also qualifies me/kids for bursaries at college and later on at university (so worth checking out the levels you/they can claim)

Not my problem more people don't read the conditions of claiming tc more carefully, but now you all know so go for it, or not, as you like

You can also deduct charitable donations

ISdads · 10/12/2018 19:46

It's not a scam or a loophole, it's a very clearly stated part of the terms and conditions. Couldn't be clearer. In fact, you have to actually write down the amounts on the form. It's really hardly hidden away.

DarienGap · 10/12/2018 19:55

Hi all
We get tax credits as I'm a full time carer and dh took early retirement.

I have only just realised that we have never put down my dhs pension contributions in previous years income declarations - thereby overstating our income by about 2-3k pa.

Is it worth contacting tax credits regarding this? Can anything be done or is it too late?

Could certainly do with the extra cash! Grin
Sorry for jumping on thread op!

Youmadorwhat · 10/12/2018 20:01

Go for it!!

Although I am finding it hilarious that when this tactic was suggested to someone (a higher tax rate payer)last week so that they could get their child allowance people were aghast that they should “take from those who needed it” yet in this circumstance everyone is all for it!! 🤔

ISdads · 10/12/2018 20:03

Just depends who posts on the day

It's the really really really obvious solution to that issue as well

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