When to stop child benefit due to high income?

Kousoku

Hi all,

After a little bit of advice please.

I pay tax through PAYE. During this tax year, my salary increased to £60k. My previous salary was £40k. This was applied from July 2014.

By my calculations, this means that my income for 2014/2015 tax year would equate to £55k [(£3333.33 x 3 months) + (£5000 x 9 months)]

We had our first child in April and started to claim child benefit. As my income for the current tax year is £55k, I understand I need to pay tax on this benefit and will need to register for self assessment.

As I will be earning £60k next tax year, it makes no sense to continue to claim child benefit for the next tax year. My question is this: Does anyone know if we can put in a stop for child benefit for next tax year now? Or should I wait until nearer the end of the tax year.

Thanks for your advice!

chrismac1

You should be conisdering a pension contribution before 5 April 15. If your income is going to be £55,000 then you need a gross pension contibution of £5,000 to get adjusted net income of £50,000. So a payment of £4,000 is all that is needed.

It's almost a no-brainer. Pay £4,000 and you:

1. Get the extra £1,000 invested by HMRC into your fund.
2. Save another £1,000 in higher rate tax.
3. Avoid the hassle and the hit with the Child Benefit Tax.

Spidernick

That's one hell of a pay rise!

I agree with post #2. However, if you reach a point whereby your earnings after pension will be over £60K then you should stop claiming the benefit at the end of the tax year. Unless I'm very much mistaken (and someone can correct me if I'm wrong) the claw back percentage is based on actual child benefit received in the year and makes no allowance for the fact that you may have stopped claiming the benefit in the year. To give an easy example, with taxable income of £55K you'd still have a claw back charge even if you stopped claiming the benefit exactly halfway through the year (thus in effect claiming the amount to which you are entitled).

As I say, I may be wrong, but the way that Self Assessment asks about Child Benefit does not seem to factor in changes in the year that I can see.

Savvy_Sue

I've been wondering about this Child Benefit thing and couples stopping the claim - that's great if both parents are working, but if one isn't (and I wouldn't have been if my partner had been earning that much!), then at least by keeping the claim active (s)he's getting a contribution record for eventual state pension purposes.

But the pension thing is a bit of a no-brainer too.

Kousoku

Thanks all for your input.

david78

Savvy_Sue wrote: »

I've been wondering about this Child Benefit thing and couples stopping the claim - that's great if both parents are working, but if one isn't (and I wouldn't have been if my partner had been earning that much!), then at least by keeping the claim active (s)he's getting a contribution record for eventual state pension purposes.

I think that the mother would still get national insurance credits even if she wasn't taking the child benefit.

See:

https://www.gov.uk/child-benefit-tax-charge/overview

"You can choose not to get Child Benefit payments, but you should still fill in the Child Benefit claim form. This will help you get National Insurance credits which count towards your State Pension."

laidbackgjr

Despite being over the limit, I still claim child benefit and pay it back via my tax return. There are a couple of reasons for doing this, 1 - cash flow you get the child benefit pay it into a savings account earn interest and then pay back much later via tax return. 2 - If you lost your job during the year and ended up not earning over 50k in the tax year, you can't backdate child benefit claims to the start of the tax year, so you risk missing out on money when you probably most need it.

Savvy_Sue

david78 wrote: »

I think that the mother would still get national insurance credits even if she wasn't taking the child benefit.

See:

https://www.gov.uk/child-benefit-tax-charge/overview

"You can choose not to get Child Benefit payments, but you should still fill in the Child Benefit claim form. This will help you get National Insurance credits which count towards your State Pension."

Ah right, I didn't realise that option was available, this is all After My Time ...

And note that I was careful not to suggest that only the mother should think about this. We had a couple of years where DH's income was very low but I was working, so we transferred the claim to him for that period.

ChasingButterflies

laidbackgjr wrote: »

2 - If you lost your job during the year and ended up not earning over 50k in the tax year, you can't backdate child benefit claims to the start of the tax year, so you risk missing out on money when you probably most need it.

I was advised by the child benefit line that it can be backdated 2 tax years. I specifically asked the question as it is a bonus payment (in the last week of the tax year) which takes us over the income limit.

I had been trying to avoid DH having to complete a SA tax return so I had asked not to receive the CB payments, however as I am still entitled to them I get the credits for my state pension - whatever that may be when the time comes...