Tax Pensions and Child Tax Credit

jlpike

I earn £1000 over the 40% tax threshold and will lose my £1700 child benefit in 2013 which withmy wife working part time I can do without.

Therfore I plan to reduce my taxible income to below £43875 by paying more into my company pension as I currently pay in the mumimum.

A Will this work?

B How much will I have topay in to reduce my taxable income by £1000? i.e paying in £1000 before tax actually pays in £1300 est after tax?

Cheers

Gertie_Walker

I dont think the withdrawal of CB is going to happen this tax year. Personal allowances are going to rise by £1000 in April.

jlpike

True it will be 2013 but they need to base the calculations on something and my money will be the previous tax year i.e 2012-2013 or more likely 2011-2012. There is no way they can give you the money based on an estimate like tax credits then try and ge it back if you go £1 over the 40%.

The £1000 increase in peronal allowances is offset by reducing he upperband so 40% tax people will be tax neutral and the banding will effectively be the same.

redpete

jlpike wrote: »

A Will this work?

Depends on the details of the CB proposal when they are actually put in place rather than when they are announced in the Tory conference (e.g. is it just on the main income earner's salary, or the household, will it be a sharp cut-off or gradual...).

B How much will I have topay in to reduce my taxable income by £1000? i.e paying in £1000 before tax actually pays in £1300 est after tax?

To reduce your taxable income by £1000 you would have to pay £1000 extra into your pension. The net affect on your take-home would be less than £1000 because you'd be paying less tax.

jlpike

redpete wrote: »

Depends on the details of the CB proposal when they are actually put in place rather than when they are announced in the Tory conference (e.g. is it just on the main income earner's salary, or the household, will it be a sharp cut-off or gradual...).

To reduce your taxable income by £1000 you would have to pay £1000 extra into your pension. The net affect on your take-home would be less than £1000 because you'd be paying less tax.

Thanks - I will try and get my head around it when the detail comes out.