Increase Pension Contributions To Keep Child Benefit

ChopperST

Resurrecting this thread at I'm completing my 2017-18 tax return.

I thought I had done my sums correctly to reduce my liability with SIPP contributions but my calculation states I owe £960 high income child benefit charge.

The total income on which tax is due section of my calculation is £50,333 after my pension contributions and personal allowance have been taken off. My understanding was the charge was 1% on each £100 over £50,000?

Why am I being charged the £960?

I am totally confused. Thanks for any help.

Edit - is it that the higher tax relief has not been applied to my self assessment account yet? Would that show at a later date?

zagfles

ChopperST wrote: »

Resurrecting this thread at I'm completing my 2017-18 tax return.

I thought I had done my sums correctly to reduce my liability with SIPP contributions but my calculation states I owe £960 high income child benefit charge.

The total income on which tax is due section of my calculation is £50,333 after my pension contributions and personal allowance have been taken off. My understanding was the charge was 1% on each £100 over £50,000?

Why am I being charged the £960?

I am totally confused. Thanks for any help.

Edit - is it that the higher tax relief has not been applied to my self assessment account yet? Would that show at a later date?

ANI includes the personal allowance.

ChopperST

zagfles wrote: »

ANI includes the personal allowance.

Sorry poorly worded and over-complicated. My ANI is £50,333.

zagfles

ChopperST wrote: »

Sorry poorly worded and over-complicated. My ANI is £50,333.

You just wrote "The total income on which tax is due section of my calculation is £50,333"

That amount quoted on tax calculations is after the PA has been taken off. ANI includes the PA. How exactly did you work out ANI? Because it doesn't state it on tax calculations

Dazed_and_confused

Edit - is it that the higher tax relief has not been applied to my self assessment account yet? Would that show at a later date?

No, you don't get a specific "higher tax relief", the pension contribution (in a personal pension/SIPP) just increases the amount of basic rate tax you can pay, which in turn will reduce the amount of higher rate tax payable.

The total income on which tax is due section of my calculation is £50,333 after my pension contributions and personal allowance have been taken off

Can you explain this? What pension contributions have you paid which reduce your income before tax is charged? Personal pension/SIPP contribution where basic rate relief has been applied at source (which is the norm) don't work like that.

ChopperST

Thanks both for replying.

Pay From Employments - £55,800
Profit From Self Employment - £4,867
Interest - £1166
Total income received - £61833

minus personal allowance

Total Income on which tax is due - £50,333

There is then a field which states "your basic rate limit has been increased by £6520 to £39750 for pension payments etc. This reduces the amount of income charged to higher rates of tax"

Sorry for the confusion.

Dazed_and_confused

Your ANI looks to be £55,313 (£61,833 less £6,520 pension contribution).

Child benefit for two kids is about £1800 and 53% of this is £950+, close to the amount charged. How much was your Child Benefit for 2017:18?

ChopperST

Dazed_and_confused wrote: »

Your ANI looks to be £55,313 (£61,833 less £6,520 pension contribution).

Child benefit for two kids is about £1800 and 53% of this is £950+, close to the amount charged. How much was your Child Benefit for 2017:18?

We were just short of £1800 because our youngest was born 3 weeks into April. I have clearly calculated wrong so I will have to recalculate for next year.

Thanks for your help.

Dazed_and_confused

Is part of your problem that last November you expected your taxable income to be just over £56k but by the end of the tax year it is actually just shy of £62k.

All three income streams have increased over your mid year estimate,

Employment £3,969 more
Self employment £867 more
Interest £686 more

kidmugsy

michaels wrote: »

Could your self employed income be earned by a company as profit with your wife as the only shareholder?

Dear God, that's asking for trouble.

I was going to suggest a private company, with its revenue being split between a small salary, a pension contribution, a dividend payment low enough to pay 0% tax, and perhaps income being accumulated for the time being. He could make his wife a shareholder (say 10%) and a director; she could do the books, communicate with the accountant, and act as company secretary. Maybe she could have a small salary and a pension contribution for those jobs.

But to try to bag the lot for the wife would invite an investigation.

P.S. It would probably make sense for the accountant who did the company tax return to do the OP's personal tax return too.

P.P.S. Is there any reason why the OP can't do a bit more salary sacrifice? Is there nothing attractive to salary sacrifice for?