Child Benefit Self Assessment & Car Mileage

Dedre

Hi,

So I recently started a new job, whereby I will be earning over £53,000

My partner and I currently claim child benefit for our one child. As I am above the threshold, I understand I need to fill in a self assessment tax-return. I have done a quick calculation and through salary sacrifices (pension / childcare vouchers / medical insurance - not sure if this still allowed but it shows on payslip as salary sacrifice?) my earnings are effectively reduced to just over £50,000. I was therefore considering putting an additional £200 into my pension this year to avoid going above the £50,000 limit. However, do I still need to complete a self-assessment tax return as my baseline earning are above this figure?

The other question I have is in respect of car mileage allowance. For the pat 3-4 years I have only received 15p per mile form my employer. I understand that I can recover 40% of the difference between 15p and 45p per mile from HMRC. Has anyone else done this? Does it effectively mean I have to submit a self-assessment tax return for each year? I used an online calculator which indicates I am due back about £250 over the years. Is it worth the hassle?

redpete

You can claim mileage using a specific form (87?) rather than submitting a full tax return, unless the total amount of expenses claimed is over a threshold.

redpete

Whether the effective hourly rate is worth claiming £250 is entirely down to how much you value your time. It would be worth it for me.

Dedre

Thanks redpete! I think I will give it a go, its not an insignificant amount of money!

Have you done it in the past? Do you know what sort of evidence they require?

Dazed_and_confused

None initially, I think the form actually says do not send any evidence and they will contact you if they do need anything.

00ec25

Dedre wrote: »

Have you done it in the past? Do you know what sort of evidence they require?

loads of people have done it in the past, they simply followed the instructions on the form....

https://www.gov.uk/government/publications/income-tax-tax-relief-for-expenses-of-employment-p87

whether you can use that form or not depends if you are already submitting self assessment tax returns. If you are then you must continue to do so until HMRC write to you are tell you to stop, you cannot unilaterally stop sending a tax return once you are on the system.

as your salary is above the higher rate threshold are you sure you do not have any other income to declare anyway?

Dedre

Thanks for your response.

as your salary is above the higher rate threshold are you sure you do not have any other income to declare anyway?

It wasn't above £50k for any previous years, but will be for the 17/18 tax year (although I should be able to bring it below £50k by putting more in to my pension). So my view is that I just need to submit a self assessment tax return next year, but the expectation is that I should be OK in terms of having to effectively pay back any child benefit. Would welcome your thoughts though?

00ec25

Dedre wrote: »

Thanks for your response.



It wasn't above £50k for any previous years, but will be for the 17/18 tax year (although I should be able to bring it below £50k by putting more in to my pension). So my view is that I just need to submit a self assessment tax return next year, but the expectation is that I should be OK in terms of having to effectively pay back any child benefit. Would welcome your thoughts though?

don't forget i was meaning your total income, that is not just your salary

do you get:
- interest on savings (that is now paid gross with no tax deducted at source
- received dividends?

yes the tax rules have changed and you now get specific tax free allowances for both those but they still count towards your total income and the higher rate tax threshold above which you must tell HMRC what you get and let them decide if they want you to do a tax return... when all is said and done we are all supposed to be self assessing and declaring everything we receive so we pay higher rate tax on it if applic

Dazed_and_confused

To be clear there are no "tax free allowances" for either interest or dividends but each may be taxable at a 0% rate so you could have, say £500 interest and £500 dividends both of which, on the level of income you are looking at having, would be taxed at 0%.

But for Child Benefit purposes it would mean your income was £51000 (50000 + 500 + 500) and therefore you would have to pay back 10% of your child benefit.

You are in the position where there is a material difference between a "tax free allowance" and it actually being a 0% tax band (which both the Personal Savings Allowance and Dividend Allowance are).

Try googling adjusted net income, that is the key thing for the High Income Child Benefit Charge.

Dedre

Thanks for that. I didn't realise that interest and dividends also gets taking into consideration. I only make c.£200 tops from interest, but will still have an impact. Presumably this also applies to ISA interest and dividends?

I have had a read on adjusted net income and how its calculated... seems straightforward apart from the pension bit... my pension comes off via salary sacrifice. Am I correct in thinking that therefore if I pay £100 a month then my adjusted net income is reduced by £1,200 a year? I couldn't quite determine if that was the case from looking at the HMRC guidance.

Thanks again!

Dazed_and_confused

You can ignore ISA interest, that is genuinely tax free providing you stick to the ISA rules.

Dividends are taxable and have to be included.

I don't think salary sacrifice pension contributions are part of the adjusted net income calculation, simply because they reduce the income which goes on your P60 so including them again would be double counting?