MSE News: Child benefit deadline for higher earners looms 4 October 2013 at 5:03PM edited 7 October 2013 at 10:01AM in Child support 20 replies 5.2K views

Former_MSE_Helen

"Around 220,000 people who earn over £50,000 and receive child benefit should register for tax self-assessment..."

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Child benefit deadline for higher earners looms




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jacklink

omg if i earned £500,000 a year i would do what princess Diana did and donate it to charity, an income of that size and taking benefits is just greed

jamesd

The children have no income. Child benefit is for their benefit, not that of their parents.

You appear to be assuming that the higher rate tax payer is the one getting the child benefit. This is not usually true. It's also not necessarily true that they are even living with the children or providing much money for their care.

shoe*diva79

Surely this is a typo and it should read £50,000?

sweaty_betty

I have a quick question if anyone can help me?

I've heard that you can avoid losing child benefit by paying more into your pension. However, surely that is only the case if you do salary sacrifice (and therefore your salary is effectively reduced by the amount you pay in)? I understand that paying for childcare vouchers (which comes out before tax) can also be used to reduce salary to lower than the £50K threshold.

I think there are lots of good reasons to pay more into pensions, but don't know if this is one of them!

Any ideas on how this would work are appreciated as I'm trying to get my head around it.

Former_MSE_Helen

Hi guys, thanks for flagging - £500,000 was a typo, and it's now been corrected to £50,000.

Agrajag

sweaty_betty wrote: »

I have a quick question if anyone can help me?

I've heard that you can avoid losing child benefit by paying more into your pension. However, surely that is only the case if you do salary sacrifice (and therefore your salary is effectively reduced by the amount you pay in)? I understand that paying for childcare vouchers (which comes out before tax) can also be used to reduce salary to lower than the £50K threshold.

I think there are lots of good reasons to pay more into pensions, but don't know if this is one of them!

Any ideas on how this would work are appreciated as I'm trying to get my head around it.

Yes this is confusing, but mostly because of the way it is reported.
The amount used for the Child Benefit calculation is not you headline salary, it is your ‘adjusted net income’. This is (roughly) your pay, minus any (non-taxable) pension contributions, plus any benefits (car etc.)
So pension contributions do NOT have to be done by salary sacrifice in order to reduce your liability.
Look at your payslip, and find the amount which has been used to calculate you tax liability for that month. Multiply that by 12 and it will give you your taxable income (as long as your monthly income is regular). If it less than £4,166 you can keep all CB. if it is above £5,000 you lose it all.
Someone with a little time could work out more precise limits based on the amount of tax you pay each month, but I don't have the time or the numbers right now.

Note these calculations are rough. The tax form you fill in will be more precise. But I hope this answers your question.
This link will help you do a better calculation
https://www.gov.uk/child-benefit-tax-calculator

WestonDave

That formula by Agrajag needs clarifying as you can make payments outside your pay to still qualify as well as through your payroll.

So for example you may get paid £5001 gross at work and have that appear on your payslip, but if you pay £670 per month personal pension contributions (grosses up to £838 which is the releif amount), or less likely £670 to charity under gift aid then you would still fall under the £50,000 limit.

http://www.hmrc.gov.uk/adjustednetincome/

Agrajag

That is actually what I meant. I was talking about the amount of income used to calculate tax. I.e. AFTER pension and other contributions. So in your example monthly pay £5001, pension contrib £667
, so taxable income is £5001-£667=£4133... So no loss of benefit.

TighterThanTwoCoatsOfPain

Agrajag - how do you factor in car benefit (NOT cash allowance) whe looking at your payslip example? I don't think it works...

alleycat`

TighterThanTwoCoatsOfPain wrote: »

Agrajag - how do you factor in car benefit (NOT cash allowance) whe looking at your payslip example? I don't think it works...

Be on your P11D surely?

I actually spoke to the Tax office about this yesterday and the only thing i found out was they'd bu!!!!ed up my tax code.

They couldn't tell me anything helpful outside of i could self assess should i wish.