Child benefit threshold / increasing pension contributions

wacky75

Hi

I am a high rate taxpayer, looking at increasing my pension contributions, not only to benefit myself and my family when I eventually draw my pension, but also to reduce my net income to below the threshold so that I am still eligible to claim child benefit.

We are married with one child.

What I am trying to establish is:

1) Do I need to increase my pension contributions so that my net income is less than £50k, to still be eligible to claim child benefit ?

2) Whilst I was earning over £50k, should I have been claiming child benefit at all, or will I eventually end up with a tax bill where I have to pay back all of the child benefit I claimed during this time ? or is it only a certain amount that you are taxed on the child benefit that I maybe shouldn't have claimed ?

I've only recently discovered that I maybe should not have been claiming this.

Thank you for any expert help that can wrap this up for me

Drp8713

I am in this situation this year for the first year. Thanks to a payrise, overtime and bonus I am having to contribute £700 a month into work pension and AVC until March to keep under £50k adjusted net income.

There is a calculator here that might be helpful.

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

But yes, broadly speaking, if pay minus your pension contributions equals less than £50k you are fine.

I would guess HMRC would catch up with you over previous years.

xylophone

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/reduce-high-income-child-benefit-charge/

stoozie1

Remember to also deduct donations made to charities through Gift Aid (grossed up).

blisteringblue

And don't forget you need your P11D in work benefits too as this is added on as if it were earned income too.

Also it's a sliding scale from 50 - 60 K so you don't actually lose it all, you just pay back on next years tax code anything between.

Because of Private Healthcare and my company car I found I had to salary sacrifice close to 30% of my salary just to keep £80 a month of child benefits. Decided that wasn't worth the hit in wages so we just stopped the child benefit.

One good thing though from doing this, no more tax return.

wacky75 wrote: »

1) Do I need to increase my pension contributions so that my net income is less than £50k, to still be eligible to claim child benefit ?

2) Whilst I was earning over £50k, should I have been claiming child benefit at all, or will I eventually end up with a tax bill where I have to pay back all of the child benefit I claimed during this time ? or is it only a certain amount that you are taxed on the child benefit that I maybe shouldn't have claimed ?

1. Yes as long as you pay your pension by salary sacrifice.

2. Still claim it, you just have to fill in a tax return. Then pay back as a % via your tax code between the 50-60K sliding scale. Obviously over 60K and you get nothing.

wacky75

Thanks for your replies
I'm employed by a company but the company doesn't provide any benefits, other than the pension.
Think I just need to ensure my net income is <50k then.
Guess I'll be hit with a tax bill for what I have claimed in child benefits for about 3 years prior !

blisteringblue

They won't chase you right away, but they will eventually catch up. If you have been over 50K for a few years I would come clean though and do tax returns for those years, the first time I went over I played dumb for 18 months and eventually had to pay a £400 bill as it was too late to add to my tax code. It eventually got to the point after another pay rise that I paid back all bar £90 of my total benefit for the year, so I just stopped it altogether after that.

wacky75

Am I right in saying that if it was 3 years x £83 that I received in CB, then I would have to repay the full £3k back but with an amended tax code, over one tax year ?

blisteringblue

No it's a sliding scale between 50-60K, you will only lose it all if you earned over 60K for all this period. They work it out as a % of benefit, so if you earned 51K you will lose 10% and have to pay this back.

This link posted by DRP8713 explains it all, but they will come for previous years.

blisteringblue

Just looked on my Self Assessment Tax Calculation and they call it

"High Income Child Benefit Charge"

As long as you complete your Self Assessment before the end of the year it will be included in your tax code for the following tax year. Later than that and you will have to settle as a lump sum.

Dazed_and_confused

The only tax/High Income Child Benefit Charge for tax years which have already ended which can be included in next year's tax code (2019:20) is from the 2017:18 return.

This has to be filed by 30 December 2018 for this to be possible and the amount due must be less than £3,000.

Anything owed for earlier tax years cannot be included in the tax code now but will have to be paid direct to HMRC. They may allow an arrangement to pay over a period of time but then interest would be charged, albeit at a low rate.