parent earning over £50k

LookingforAdvice99

Hi All,

I was struggling to see where else I could post this on the forums so have posted on a closest match here.

I am about to start a new job and am being paid a basic salary of £50k with a discretionary bonus and non-contributory pension scheme.

My wife earns about 30K.

We have 2 boys aged 3 yrs and 7 months old. We currently receive child benefit for both children but understand that as soon as one parent earns over 50K you lose the child benefit.

To us that is about £1700 per year for both children

I've gone online and used a child benefit calculator and entered how much I earn, how much pension I will pay towards my non-contributory pension scheme, childcare vouchers I will receive etc etc.

I know from various calculations that if you earn above 50k if you show that in your salary you pay a certain amount into a pension, apply for childcare vouchers, etc etc therefore being taxed below the threshold you could avoid paying tax on the child benefit.

I guess what I'm trying to say is how can I ensure that we continue to receive child benefit by making contributions from my salary to elsewhere? e.g. pension.

Is anyone here in a similar situation and if so what did you do avoid paying the tax.

I played with this tool to calculator whether I would or wouldn't receive child tax benefit and how much tax I would pay on it.
www.
gov.uk/child-benefit-tax-calculator

Using this tool I put the following figures in

Scenario1
Salary: 50,000
Medical Insurance: 2,000
Everything else left blank
result: we would receive £1770.60 child benefit but be taxed £354

Scenario2
Salary: 50,000
Medical Insurance: 2,000
Childcare voucher: £3,840
Everything else left blank
Result: We would receive £1770.60 and pay no tax

Pension will be my only retirement plan and have option to contribute on top of the company already paying into it.

I'll apply for childcare vouchers (not sure how much just yet) because at least 1 if not both will go to private nursery.

I'm pretty sure with a base salary of 50k and with a pension and childcare vouchers I'll continue to receive child benefit and potentially pay no tax on it if I can work out the how much pension and childcare vouchers I will be applying for.

Does this sound about right.


Thank you.

System

The benefits and tax credits board would be more suitable for you.

http://forums.moneysavingexpert.com/forumdisplay.php?f=139

I have asked for this to be moved, hope you get some answers.

LookingforAdvice99

thank you - new to this - hopefully I'll be notified by email when and where my post gets moved to.

soolin

I've moved this to a different board which I think will get better responses. I have left a redirect in place for the benefit of the OP.

MissMoneypenny

LookingforAdvice99 wrote: »

Hi All,

I was struggling to see where else I could post this on the forums so have posted on a closest match here.

I am about to start a new job and am being paid a basic salary of £50k with a discretionary bonus and non-contributory pension scheme.

My wife earns about 30K.

We have 2 boys aged 3 yrs and 7 months old. We currently receive child benefit for both children but understand that as soon as one parent earns over 50K you lose the child benefit.

To us that is about £1700 per year for both children

I've gone online and used a child benefit calculator and entered how much I earn, how much pension I will pay towards my non-contributory pension scheme, childcare vouchers I will receive etc etc.

I know from various calculations that if you earn above 50k if you show that in your salary you pay a certain amount into a pension, apply for childcare vouchers, etc etc therefore being taxed below the threshold you could avoid paying tax on the child benefit.

I guess what I'm trying to say is how can I ensure that we continue to receive child benefit by making contributions from my salary to elsewhere? e.g. pension.

Is anyone here in a similar situation and if so what did you do avoid paying the tax.

I played with this tool to calculator whether I would or wouldn't receive child tax benefit and how much tax I would pay on it.
www.
gov.uk/child-benefit-tax-calculator

Using this tool I put the following figures in

Scenario1
Salary: 50,000
Medical Insurance: 2,000
Everything else left blank
result: we would receive £1770.60 child benefit but be taxed £354

Scenario2
Salary: 50,000
Medical Insurance: 2,000
Childcare voucher: £3,840
Everything else left blank
Result: We would receive £1770.60 and pay no tax

Pension will be my only retirement plan and have option to contribute on top of the company already paying into it.

I'll apply for childcare vouchers (not sure how much just yet) because at least 1 if not both will go to private nursery.

I'm pretty sure with a base salary of 50k and with a pension and childcare vouchers I'll continue to receive child benefit and potentially pay no tax on it if I can work out the how much pension and childcare vouchers I will be applying for.

Does this sound about right.


Thank you.

HMRC will base your claim on all annual taxable income, not just on your base salary. Therefore your bonus will come into the equation too. Any idea how much your bonus might be?

heartbreak_star

This might sound a bit odd, but surely on that fairly hefty salary you shouldn't be looking to essentially cheat the system to claim a small benefit you shouldn't need with that income?

Maybe I'm wrong.

HBS x

saidan

you'll earn £80K basic between you - and you are worried about child benefit of less than £2K :doh:

MissMoneypenny

heartbreak_star wrote: »

This might sound a bit odd, but surely on that fairly hefty salary you shouldn't be looking to essentially cheat the system to claim a small benefit you shouldn't need with that income?

Maybe I'm wrong.

HBS x

They aren't cheating the system. The government are encouraging people to save for their old age so that they aren't a burden to to the welfare state for years. On those wages, they will be paying a lot in taxes and no doubt will pass their good work ethic onto their children, so that they too won't be a burden to the welfare state. It's money well invested by the govenment.

They don't get a pay rise for every child they have; unlike those on the benefit Tax Credits, who ask for more Tax Credits with every baby they have.

Those cheating the system are being dealt with by all the welfare reforms and other welfare cap plans.

Bobl

The rules are pretty simple, if one parent earns more than £50K you have two choices:

1. Opt out of receiving it.
2. Claim it and Pay it back through the Tax system

As stated above your total pay for the year will be taken into account including bonuses so I would have through you are better off Opting out. If you don't you should be paying it into a separate account so it is readily available when you have to pay it back through tax.

heartbreak_star

I'll remain sceptical. If I earned >£50k I wouldn't be trying to wangle my wages on paper to <£50k to claim it.

YMMV.

HBS x

Voyager2002

Bobl wrote: »

The rules are pretty simple, if one parent earns more than £50K you have two choices:

1. Opt out of receiving it.
2. Claim it and Pay it back through the Tax system

As stated above your total pay for the year will be taken into account including bonuses so I would have through you are better off Opting out. If you don't you should be paying it into a separate account so it is readily available when you have to pay it back through tax.

You are missing the point.

The system allows someone to reduce their taxable income, either by giving money to charity or by putting it into a pension fund, or by a few other methods. They are then treated as if they had never had the income in question. What the OP is seeking to do is entirely legal and legitimate: these tax exemptions were put in place in order to encourage people to increase their pension savings.