Child Benefit & Higher Rate Tax

alleycat`

hunmoss wrote: »

I am about £500 below the limit, i pay 5% of my salary into a pension scheme through work but pay tax on my basic salary. I do not pay AVC on my bonus.
I used to claim help towards nursery costs through child tax credit but now they have reduced the level i no longer qualify.
What is the Childcare Voucher Scheme and not sure what you mean "Its a very simple scheme to operate and your employer should offer it."
Thanks

http://www.hmrc.gov.uk/calcs/ccin.htm
http://www.moneysavingexpert.com/family/childcare-vouchers

jem16

Lovelyjoolz wrote: »

Where do you get £42,475 from? As far as I know, the 40% tax bracket starts at £35,001 currently, and will start at £34,371 from April this year.

That's the taxable income bracket. You have to add in the personal allowance of £7475 to that.

From April 6th it will be £8105 plus £34,370 which equals £42,475 same as this year.

JimmyTheWig

zagfles wrote: »

it's supposed to come into effect in Jan 2013

That's the other thing I don't understand about the proposals.
How can something that depends on annual income come in part way through a tax year?
Say you earned £60k a year from April until December then lost your job taking a new one earning £30k a year from January 2013. You'd be a higher rate tax payer that year so would lose the child benefit even though you were only earning £30k from when the change came in.

jem16

hunmoss wrote: »

I am about £500 below the limit, i pay 5% of my salary into a pension scheme through work but pay tax on my basic salary.

So assuming a salary (incl bonus?) of £42,000 approximately, you pay 5% into a pension which is £2100. That reduces your taxable income so you are approximately £2500 below higher rate tax at the moment.

alleycat`

jem16 wrote: »

So assuming a salary (incl bonus?) of £42,000 approximately, you pay 5% into a pension which is £2100. That reduces your taxable income so you are approximately £2500 below higher rate tax at the moment.

Based on what you've told us and what Jem has ascertained i'd, personally, speak to your payroll department.

They should be able to guide you on your best options (assuming they are reasonably decent) and give you an accurate assessment of how close you are to the cutoff / 40% bracket.

hunmoss

also i have medical insurance of £1700 benefit that reduces my tax code.

Not sure exactly how my pension works but i pay full tax on my earnings not net of pension contribution so even if i increased my contributions i still pay tax on full earnings.

jem16

hunmoss wrote: »

also i have medical insurance of £1700 benefit that reduces my tax code.

OK. Can you give us your tax code and then we can say for sure. I take it my assumption on your total income is about right?

Not sure exactly how my pension works but i pay full tax on my earnings not net of pension contribution so even if i increased my contributions i still pay tax on full earnings.

Company pensions are normally paid from gross salary. Can you clarify what kind of pension scheme you are in?

WestonDave

JimmyTheWig wrote: »

That's the other thing I don't understand about the proposals.
How can something that depends on annual income come in part way through a tax year?
Say you earned £60k a year from April until December then lost your job taking a new one earning £30k a year from January 2013. You'd be a higher rate tax payer that year so would lose the child benefit even though you were only earning £30k from when the change came in.

As I understood it, everyone will still get it. Those who are clearly over the limit will be recommended to decline it. Those who are borderline will have it taken back as an additional tax if when their taxes are calculated they are over the limit. However whether that can work in practical terms without creating a mammoth amount of admin remains to be seen. Although the anomaly whereby one family on £80k joint would get it whereas another on £50k sole income don't is clearly unfair, the admin involved in looking at family incomes would be even worse, with all sorts of implications like data transfer from one individuals records to another.

hunmoss

I pay into a Group Personnel Pension Scheme, i pay 5% of my contracted salary and my co pay 10% - tax code 5910, income about right. As i say i do not pay pension on my bonus around 5k

jem16

hunmoss wrote: »

I pay into a Group Personnel Pension Scheme, i pay 5% of my contracted salary and my co pay 10%

That's different then. You are paying in 5% net which is actually a 6.25% gross contribution.

- tax code 5910, income about right.

Do you mean tax code is 591L and your personal allowance is reduced to £5910? If so higher rate tax starts at £40,910 for you. So if you are on an income of £42,000 you are already paying higher rate tax without including the pension contributions.

If these figures are correct you should be claiming some higher rate tax relief from HMRC on your pension contributions.

As i say i do not pay pension on my bonus around 5k

So on £37k you will pay £2405 gross contributions which will reduce your £42k income to £39,595 so around £1315 less than the higher rate tax bracket.

However if you are not claiming that extra tax relief you are losing out.