Here’s a question to rile some of you. I gather I may well be a good 12 months or so behind the curve on this, and I may be some way off the mark in my undertanding of how these things work.

Say Mr A. N. O’Nymous earned £5k over the cut-off point for the child tax credit thing, could Mr O’Nymous put that £5k into their pension to end up under the limit? If so, and given the cost of child care and the 40% tax on that £5k, would it be financially beneficial to “lose” the £5k and pick up some lovely government handouts in its place?

I know nothing of these things, and it’s never been something in my sphere of awareness, but it would get on my hypothetical nerves if my hypothetical wife’s hypothetical best friend received child tax credits despite their hypothetical total household earnings being roughly £10k more than ours. Hypothetically speaking.

if I still earnt over the threshold, and I didn’t have a pressing need for that money, that’s what would be doing.

I didn’t need it, so I’m doing a 4 day week instead and spending quality time with my son. we’re going to the aquarium on friday.

If we hypothetically earnt so little that we hypothetically qualified but we felt we weren’t “poor” enough to deserve it, we wouldn’t hypothetically claim it.

What I’m saying is that the way it is calculated makes little sense as it does not properly cover “household income”.

I’m not in a position to be claiming it or not, druidh. Just wondered how it worked, and if paying extra into pensions actually counted as reducing your income as far as HMRC were concerned.

What counts as income?
Your income before tax and National Insurance is taken into account.

That would indicate that AVCs would not decrease your qualifying income.

are you talking about tax credits? or child benefit?

because the thresholds are very different.

IIRC you fill in the accompanying worksheet (825 ?) which does allow pensions to be taken into account. and gift aid donations, inter alia.

Used to be a nightmare filling in the form in this household, wife with two very part-time (and randomly houred) employments, pension contrib, gift aids, me self-employed with some investment income and a property rented out (plus pensions and gift aid of course).

much simpler now wife doesn’t work 🙂