Pension Credit income deducts the income tax on savings interest it does not count #2835

Household

A single person in Scotland, age 70, in 2026: employment income £86,381, private pension £38,831, savings interest £150,000, no capital input (savings nil), council tax £2,000, no Universal Credit claim.

Figures on main (6c6e229a51fbd804dab2062dac1f94af04c609c2)

What the code does

pension_credit_income adds the claimant's and partner's income sources listed in gov.dwp.pension_credit.guarantee_credit.income. The list leaves savings interest out and takes capital into account through pension_credit_deemed_income instead. The formula then deducts each member's whole income_tax_before_winter_fuel_payment_charge and national_insurance (with the notional self-employed amounts swapped in for the actual Class 2, Class 4 and profit tax). So it deducts the £72,755.02 of income tax that this person would pay without the pay, most of which falls on the £150,000 of interest it does not count.

Here the counted income comes to £86,381 + £38,831 = £125,212. Less the whole £115,236.11 of tax and the £260 earnings disregard, it comes to £9,715.89, which falls short of the £12,376 minimum guarantee. The model therefore pays £2,660.11 of guarantee credit to someone whose gross income exceeds £275,000. That award also passports the person through Council Tax Reduction's guarantee credit route, which sets their CTR income to nil.

The Council Tax Reduction pensioner schemes had the same problem, and #2834 fixes it for their general route by deducting only the extra tax earnings cause plus the tax on the other counted income, with the uncounted income above it. Pension Credit could use the same split (pension_credit_income_tax_without_earnings with the uncounted income also set to nil). Before anyone changes the formula, they should quote the legal test for Pension Credit's tax deduction from the State Pension Credit Regulations 2002.

The model gives the same £2,660.11 at 2da212abcf2086337fc088a4a1236f4ae7b6af63.