paying in to pension with tax paid money

jimnew

The company i work for already pay a % of my salary into my pension fund.It may be difficult for them to pay any more into fund before the end of the tax year.

I am very close to the child benefit charge level.

If I was to pay into my fund with tax paid money;

1-How easy is it to do this?

2-How do i claim the tax back?

3-If i pay in as much as £10 000 do i get 40% tax relief

4-and finally can i now tell the revenue i am under the child benefir charge level?

I would be gratefull for any help

mania112

Before I try to answer you specific questions, it's worth pointing out that what you're doing doesn't make a huge amount of sense from a day-to-day living point of view.

You want to lower your 'net-adjusted-income' to below £50,000 so that you can continue to receive child benefit?

Child Benefit is £20.30 per week, so I presume you'll be paying more than that into a pension to reduce your income? (on the basis that 20.30*52=1,055.60 and you're presumably earning more than £51,0155.60pa?)

However, paying more into your pension is always a good thing, so let's go with it:

1. Very easy, just ring your provider and tell them you'd like to make further contributions - they'll likely send you a direct debit mandate, or even better, they might be able to arrange it all over the phone.

2. You can't claim any tax back, i'm not sure what you mean.

3. Yes, this probably answers #2(?) If your income is at the 40% bracket, so will the tax relief on any contributions. In reality, everyone has relief of 20% direct into the pension and the further 20% is claimed at the end of the tax year.

4. This i'm not sure about. But I hear that anyone who earns over £60k has to actively opt-out, so there must be some sort of self-assessment form.

xylophone

http://www.thisismoney.co.uk/money/news/article-2225223/Child-benefit-cuts-How-use-pension-tax-breaks-yours.html

http://www.thisismoney.co.uk/money/pensions/article-2192562/Trick-avoid-losing-child-benefit-boost-pension.html
might be worth a read.

atush

Yes, you clam back the extra tax relief via HMRC.

Either thru a different tax code, or perhaps self assessment. They will then know you are under 50K and will not claim back the child benefit.

Do I get from this that in the past you had only the employers contribs into your pension, and you made none yourself? Always best if you do, even if not a CB issue. Esp if you pay 40% tax.

Remember, that you only get 40% TR on the amt of pension that corresponds with the amt of salary over the HRT. So if you get paid 51K, and the HRT band starts at 42K, you only get HRT relief on 9K of additional contribs. But if you receive other income such as non isa bank interest, this can count too (as will be in the 40% band)

jamesd

If you want to get £10,000 of reduction in income as a higher rate tax payer you would pay £8,000 after tax into a pension. The pension would add 25%, £2,000, to that to handle the basic rate tax relief and the gross in the pension would be £10,000.

You tel lHMRC in a letter that you have paid a gross amount of £10,000 into a pension, including the basic rate tax relief. HMRC will adjust your tax code so that you end up getting £2,000 back in lower taxes each month. They will do this by sending you a notice that has a basic rate band that is larger than the usual one, so look for that bit on the form you get about the adjustment. It doesn't say it's higher, it just is...

You'd then pay only basic rate tax on that part of your income, instead of higher rate.

You can also tell HMRC about estimated pension contributions for next year and they will use that estimate to work out your tax code for next year. They also take estimates for savings account interest and other things and use those.

There are limits to how far they can adjust things with a tax code and they might instead send you a cheque or ask for bank details so they can send you an electronic payment.

Those who do need adjustments for child benefit will be required to become part of the self-assessment system and file a tax return every year. I don't know if what is discussed here will be sufficient to prevent that extra hassle happening to you.

Child benefit is effectively some extra tax relief benefit on your pension contributions, making it even more rewarding than usual for a tax payer to make pension contributions.