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

John_Pierpoint

The brighter the candle, the greater the circumference of darkness revealed.

We learn something new on here every day? Suwanee:

http://forum.wordreference.com/showthread.php?t=178414

mysk_girl

chrismac1 wrote: »

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.

So for those of us that contribute via salary sacrifice, it should just be the figure on the P60 that counts as the amounts sarificed never enter the tax system? OH earns £57,000, but we sacrifice the maximum for childacare vouchers (£2916pa) and he puts £350pcm into a pension via salary sacrifice - so his P60 should only show £49884pa - meaning we are exempt from the tax charge, correct?

Tinker009

mysk_girl wrote: »

So for those of us that contribute via salary sacrifice, it should just be the figure on the P60 that counts as the amounts sarificed never enter the tax system? OH earns £57,000, but we sacrifice the maximum for childacare vouchers (£2916pa) and he puts £350pcm into a pension via salary sacrifice - so his P60 should only show £49884pa - meaning we are exempt from the tax charge, correct?

Yes, take the taxable amount on the P60 then deduct any gross pension contributions/Gift Aid donations etc. if you're below the £50k then no charge. But if you go over the £50k at all there will be some clawback. The amount of child benefit is reduced by 1% for every £100 of income that exceeds £50,000.

ceeforcat

Tinker009
Today, 12:31 PM

Yes, take the taxable amount on the P60 then deduct any gross pension contrubutions/Gift Aid donations etc. if you're below the £50k then no charge

I think it should be clarified as 'P60 less any gross contributions paid in addition to company pension / salary sacrifice contributions.

exarmydreamer

I suspect this thread will only show. No matter how much a person(s) earn, they will do their best to secure an extra couple of thousand pounds. Of course, this is similar to those who are having benefits cut from them, such the disabled. Most of which wish they could 'get around', the system to live a decent life.

I've always worked and so has my husband but reading this thread has been a genuine eye opener. Generally the more you have, the more you try to dodge the benefit cuts. I notice many of the very rich do this in the form of tax havens, is this not a similar thing. There should of course be a cut off and couples should not benefit, if both are over 50K each but come on:

One does wonder, if there are genuine morals in this country.:(

mrschaucer

chrismac1 wrote: »

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!

Thank you for this, a lovely clear explanation. I was just congratulating myself for having understood it when I got all confused again. What about 40% tax relief on the pension contributions for these people who must be paying tax at the higher rate? Could you run the above scenario again for me in words of one syllable explaining how the 40% tax relief works for (say) someone on £60K. Will be for ever grateful!

zagfles

mrschaucer wrote: »

Thank you for this, a lovely clear explanation. I was just congratulating myself for having understood it when I got all confused again. What about 40% tax relief on the pension contributions for these people who must be paying tax at the higher rate? Could you run the above scenario again for me in words of one syllable explaining how the 40% tax relief works for (say) someone on £60K. Will be for ever grateful!

It was only half the story. It missed the higher rate relief part.

If you're on £60k, you can pay £8k into a personal pension. That gets grossed up to £10k by your pension provider claiming basic rate relief. Your "adjusted net income" is £50k, so no child benefit loss.

In addition, you get a £2k rebate off the taxman when you do your tax return, as they will extend your basic rate band by £10k giving you a £2k rebate on your tax.

If you intend to do this every year, they may adjust your tax code by adding £5000 to it (so 810L would become 1310L), which will give you that additional £2000 relief in the year rather than as a lump sum when you do the tax return. (£5000 added to you tax code get you 40% relief - resulting in £2000 less tax).

Alternatively - if your company offers a salary sacrifice type pension arrangement, or AVCs etc, you could contribute £10k direct from your gross pay and then you'll only get taxed on the £50k to start with. So you'll get all the 40% relief direct through payroll (plus 2% NI if it's salary sacrifice).

Anon

exarmydreamer wrote: »

I suspect this thread will only show. No matter how much a person(s) earn, they will do their best to secure an extra couple of thousand pounds. Of course, this is similar to those who are having benefits cut from them, such the disabled. Most of which wish they could 'get around', the system to live a decent life.

I've always worked and so has my husband but reading this thread has been a genuine eye opener. Generally the more you have, the more you try to dodge the benefit cuts. I notice many of the very rich do this in the form of tax havens, is this not a similar thing. There should of course be a cut off and couples should not benefit, if both are over 50K each but come on:

One does wonder, if there are genuine morals in this country.:(

I am sure these discussions would be reduced if the decision was fair and equitable. But why should 1 household with 1 earner on £50k+ lose some/all Child Benefit but another household with two on £49,999 keep it?

This part of the forum is called Cutting Tax which is what is being discussed...? Why would you pay more tax than you legally need to?

Someone on £50k is still making a significant contribution through tax and NI.

Anon

Michael_Nottingham

Exactly Anon

They may also be working very hard for this money

And the marginal rates for some people in the £50-60k Band (not me by the way) could be extremely penal - more penal the more children they have

And potentially less likely to be getting any other benefits

waccamole

exarmydreamer wrote: »

reading this thread has been a genuine eye opener.

I experienced a genuine eye opener the other day on the debt forum. I'd never subscribed to the 'you're as well off on benefits as working' school of thought so was amazed to read someone's SOA which showed that with one low paid parent and one on JSA their net family income was a few pounds more than ours is.

My salary is over £50K.

I am the only earner in the family and we have one less child.

So, although £50K is a lot for a single person, when the net amount after tax and NI is supporting a family of five it is actually in the same ball park as the income the benefits system deems appropriate for that size of family.