Anyone had a letter from HMRC yet about Child Benefit Tax?

tyllwyd

It's probably a stupid question, but if you have a salary of more than £50K, but pension payments mean that your income is less than £50K so you won't have to repay any child benefit, do you still have to fill in a self-assessment form even if you didn't do one before?

MB1919

tyllwyd wrote: »

It's probably a stupid question, but if you have a salary of more than £50K, but pension payments mean that your income is less than £50K so you won't have to repay any child benefit, do you still have to fill in a self-assessment form even if you didn't do one before?

I was just coming on here to ask that question, or something very similar. I have an annual salary of around £52k but pay about £4000 per annum into my pension. I assume this means I will not be liable for this tax as my wife claims child benefit for our two sons? If so, should I still register for self-assessment and then fill in the form?

I should add I received the letter from HMRC today if that makes any difference.

dori2o

MB1919 wrote: »

I was just coming on here to ask that question, or something very similar. I have an annual salary of around £52k but pay about £4000 per annum into my pension. I assume this means I will not be liable for this tax as my wife claims child benefit for our two sons? If so, should I still register for self-assessment and then fill in the form?

I should add I received the letter from HMRC today if that makes any difference.

If your income is less than £50k when you have taken into account all pension payments, professional fees, expenses etc then there is no need to complete an SA form.

Don't forget that your total income includes investment income (interest/Dividends), profits on income from property, self employed profits, etc etc.

Best thing to do for those not in SA already is to wait until you have the details of all of your income and then work it out. The latest you can register for SA without penalty is 5 October following the end of the tax year in which you first meet the criteria for SA.

If you make payments to pensions outside ones provided by your employer, or to professional bodies, or have job expenses then make sure HMRC know how much your annual payments are. That way you can get any relief you are due throughout the year, and also your net income details will be up to date ion the system.

Eydon

dori2o wrote: »

That is not the case at all. Yet more rubbish being spouted.

I hoped that was the case. Taken from this page...

"There is one small group of people who may not be caught by the HMRC's mail-shot but could be liable for tax.

Suppose you are a parent, a single mother for instance, and you give some of your child benefit to the child's grandparents because they look after your child while you go out to work?

If one of the grandparents happens to earn more than £50,000 a year, then the fact that they are receiving some of your child benefit will trigger a tax bill for them."

Perhaps they are meaning the grandparent claims the CB rather than the parent (is that possible?) or perhaps, as you say, they are spouting rubbish.

dori2o

Eydon wrote: »

I hoped that was the case. Taken from this page...

"There is one small group of people who may not be caught by the HMRC's mail-shot but could be liable for tax.

Suppose you are a parent, a single mother for instance, and you give some of your child benefit to the child's grandparents because they look after your child while you go out to work?

If one of the grandparents happens to earn more than £50,000 a year, then the fact that they are receiving some of your child benefit will trigger a tax bill for them."

Perhaps they are meaning the grandparent claims the CB rather than the parent (is that possible?) or perhaps, as you say, they are spouting rubbish.

If the Grandparent is claiming the ChB, then it is the Grandparent who is legally responsible for the child. Therefore if they or their husband/partner is earning over £50k they will be affected by the charge as they are the primary care givers.

If the single parent is paying the Grandparents to look after their child whilst they go to work, that has nothing to do with Child Benefit. They are simply paying for childcare.

MB1919

dori2o wrote: »

If your income is less than £50k when you have taken into account all pension payments, professional fees, expenses etc then there is no need to complete an SA form.

Don't forget that your total income includes investment income (interest/Dividends), profits on income from property, self employed profits, etc etc.

Best thing to do for those not in SA already is to wait until you have the details of all of your income and then work it out. The latest you can register for SA without penalty is 5 October following the end of the tax year in which you first meet the criteria for SA.

If you make payments to pensions outside ones provided by your employer, or to professional bodies, or have job expenses then make sure HMRC know how much your annual payments are. That way you can get any relief you are due throughout the year, and also your net income details will be up to date ion the system.

Many thanks for your prompt response. I've looked on the HMRC website and the following is classified as annual income:

• salary (before any pension contributions are taken away)
• company benefits you get (eg car, fuel and medical benefits)
• profits if you’re self-employed
• interest you get from savings (including any tax that’s already been paid on it)
• State Pension payments and other State benefits that are taxed
• payments from personal and occupational pensions or annuities
• income from dividends (including the dividend tax credit) or trusts
• rental income

I only receive my salary (of around £52k as I mentioned earlier). With pension contributions of around £4000, I'll be below the threshold. I believe that is referred to as adjusted net income, but that certainly is not mentioned in the letter I received today.

I suppose I should wait until I receive my P60 in April just to confirm what I already know. It is just a slight worry that I may be required to fill in a self-assessment form for the first time, but that now appears not to be the case. This should have been made much clearer by HMRC.

waccamole

I'm not going to bother calling HMRC after the bilge I was told last time so here's a 'quick' question for the experts on here:

If my adjusted net income (all PAYE salary) for 2012/13 is over £50K I am liable for the tax charge for Child Benefit received between 7 January 2013 and 5 April 2013 so need to register for self assesment by 6 October 2013 and complete a tax return for 2012/13. Which doesn't need to be submitted until October/December 2013 so, my tax code would not be adjusted until after then?

If my adjusted net income for 2013/14 is under £50K then I will not be liable for the tax charge with effect from 6 April 2013.But, I will not need to complete another tax return till October/December 2014 by which time I will have over paid the tax charge.

True?

So, what is it best to do if I don't want to over pay? I can't submit my tax return until after the end of the tax year so can/should I write to HMRC in April 2013 to let them know my anticipated income for 2013/14 is lower than £50K instead?

Thanks

W

dori2o

waccamole wrote: »

I'm not going to bother calling HMRC after the bilge I was told last time so here's a 'quick' question for the experts on here:

If my adjusted net income (all PAYE salary) for 2012/13 is over £50K I am liable for the tax charge for Child Benefit received between 7 January 2013 and 5 April 2013 so need to register for self assesment by 6 October 2013 and complete a tax return for 2012/13. Which doesn't need to be submitted until October/December 2013 so, my tax code would not be adjusted until after then?

If my adjusted net income for 2013/14 is under £50K then I will not be liable for the tax charge with effect from 6 April 2013.But, I will not need to complete another tax return till October/December 2014 by which time I will have over paid the tax charge.

True?

So, what is it best to do if I don't want to over pay? I can't submit my tax return until after the end of the tax year so can/should I write to HMRC in April 2013 to let them know my anticipated income for 2013/14 is lower than £50K instead?

Thanks

W

If you know your income in 2013/2014 is going to be below £50k, then call them and advise them of your estimated income, pension contributions, professional fees, etc etc so they can update the record.

The other thing to remember is that HMRC will only include a restriction to offset the ChB in the tax code if you ask for one.

If you don't ask for the restriction, then it will not be included in the code.

It's never a bad idea to advise HMRC of your estimated income for the up coming year. It means they have the best chance possible of collecting what is due, when it's due.

Anon

Interesting discussions on here thank you, sorry in advance for the long message.

As I understand it, if your salary falls between £50 and £60k the Child Benefit gets reduced until you get hit for the full whack as a tax charge to effectively give some or all of it back.

I read online that one way to mitigate against this could be to pay increased contributions into a pension plan so that your adjusted net income is below £50k. For some, it may make sense - if I have understood correctly, it means you would keep the CB but lose the equivalent from your income (so you may be no better/worse off than you would be losing the CB, but you at least get to keep it, albeit in your future pension rather than now - but you are going to lose some or all of it anyway if you don't).

See the following which talks through some of the principles:
http://www.pruadviser.co.uk/content/support/technical_centre/child_benefit_trap/

As a rough calculation, how much would you have to pay into your pension to cancel out the CB? I did try following the examples at the Pru but I am not 100% that I got it. Maybe it will be clearer to others. It appears in their example that for someone earning £60k with 4 children/£3146 child benefit, they would need to pay in £10k which is straightforward (I was lost with the gross/net - I understood the principle but not in reality how much you would have to lose - the gross or net figure?).

As an example, what would you have to pay in to your pension if £55k salary and £3146 child benefit (and what effect would childcare vouchers and existing pension payments have on this?). The assumption I am making is the only aim is to avoid paying back the CB, not normal pension planning? If you were planning on doing this, do you have until January when the new rules come in or the end of the tax year in April to sort it?

As a higher rate tax payer how much would you have to earn gross to retain £3146 net? Is it 3146/60*100 - so 5243.33?

I am sure the point will be made at some point about why would anyone on more than £50k be entitled to/need CB anyway, but then I still find it slightly odd (unfair) with this change that a family with two earners on £49,999 will keep it, but a household with one on £50k-£60k will lose some or all of it.

Are there any other tax efficient options for someone on PAYE to keep the income and the CB?

Many thanks

Anon

chrismac1

How personal pensions work in simple terms:

You pay in £800. That is the NET.
The provider claims back £200 of basic rate tax from the Treasury and invests £1,000 (less fees) into your fund. The £1,000 is the GROSS.

It is the £1,000 which adjusts down your income. So if someone on £60k pays £8k net (£10k gross) into a qualifying pension in 2012-13 that makes adjusted net income of £50k. No child benefit cut!

I also recommend - if you don't already - keeping tabs on payments you make under Gift Aid, for example. Someoone or other I know is always running a Marathon etc. and if I contribute £50 or £100 to them then that can go to my tax return just like the pension contribution.

This is a good thread, though not for HMRC or George Osborne - because it is highlighting what a mess this is likely to be. Votes in marginal seats will be going down the Suwanee from January onwards.