Child benefit threshold / increasing pension contributions

blisteringblue

Let them do the sums though, I was expecting to pay back more than I did. I was expecting a bill for an earlier year (1st year of the new system) too when I slightly went over but got a letter saying on further investigation I didn't need to pay anything. So I'm not sure HMRC are that clued up themselves. Although that was back in 2014.

wacky75

ok I'll do that then, thanks.

atush

xylophone wrote: »

The OP's spouse is earning and may well be paying NI (or being credited) on her own account - she can check.

It was not stated that the spouse was earning. I just wanted them to know it should be in her name. Esp if any time taken off after a baby.

They mentioned the earnings later.

atush

wacky75 wrote: »

I'm going to be earning over 60k with bonus, so I will need to contribute 10k of that to the pension, which is what I would like to do but it does seem a lot for a gain of 1k in CB.

I agree, that is a poor way they have decided to base it on - should be on the combined earnings for sure..

You wont need to contribute 10K, you need to contribute 8K. The govt adds 2K, and you get 2K off your tax. These figures need adjusting dep on your total income for the year ie were based on an income of 60K.

So basically you are conributing 6K to get 1K back in CB. Plus you'll have 10K in your pension. Not too bad a return on 6K is it?

wacky75

atush wrote: »

You wont need to contribute 10K, you need to contribute 8K. The govt adds 2K, and you get 2K off your tax. These figures need adjusting dep on your total income for the year ie were based on an income of 60K.

So basically you are conributing 6K to get 1K back in CB. Plus you'll have 10K in your pension. Not too bad a return on 6K is it?

Thanks
I understand that I get 2k off my tax in the form of tax relief, where does the other 2k that you say the govt contribute come into play ?

NoMore

Because with 60k of income your in the higher 40% tax band so can claim it back on your pension contributions. 20% is automatically claimed for you by pension, the other 20% you will have to contact HMRC to claim back.

Dazed_and_confused

You get basic rate (20%) tax relief added by the pension company so for example if you pay £8,000 then they add £2,000 giving you a fund of £10,000

This increases the amount of basic rate tax payable by £10,000 potentially saving you another £2,000 in higher rate tax.

And the £10,000 is also taken into account when calculating your "adjusted net income" which is what the High Income Child Benefit Charge is based on.

So you can ultimately end up with £10,000 pension fund which has only really cost you less than £6k.

wacky75

Ok many thanks again for your replies, that's very helpful

atush

Dazed_and_confused wrote: »

You get basic rate (20%) tax relief added by the pension company so for example if you pay £8,000 then they add £2,000 giving you a fund of £10,000

This increases the amount of basic rate tax payable by £10,000 potentially saving you another £2,000 in higher rate tax.

And the £10,000 is also taken into account when calculating your "adjusted net income" which is what the High Income Child Benefit Charge is based on.

So you can ultimately end up with £10,000 pension fund which has only really cost you less than £6k.

Plus the 1K CB.

Which means put 6K into pension and get 11K total in pension and CB.

Spidernick

wacky75 wrote: »

I agree, that is a poor way they have decided to base it on - should be on the combined earnings for sure..

Given that we have independent taxation in the UK, that is simply not possible. Believe it or not, there will be couples who don't disclose their income to each other and data protection laws means that HMRC cannot just send a statement showing how the charge is made up, as they would be divulging the other spouse's/civil partner's income within this, which they simply cannot do without that person's implicit consent.

It would also require both parties to file tax returns (as a P60 and P11D just give taxable earnings), but (non-ISA) interest and dividends have to be considered as income for the purposes of the claw back calculation, even if there is no tax payable on these.

In short, your 'for sure' idea is a complete non-starter, I'm afraid. Your anger/frustration would be better aimed at George Osborne for means testing this benefit in the first place and thus creating a lot of associated admin, in terms of people having to file tax returns who would otherwise have not needed to do so.

Turning to related matters: remember that the charge is on each complete £100 over £50,000, with a 1% claw back for each £100 until £60,000 is reached (when there is then a 100% claw back). As such you can have income for the purposes of the calculation of £50,099 and there is no claw back, but £1 more and you have to pay £25 (if there are 3 kids, as an example). You may therefore have the anomaly whereby a £5 net charitable donation (for example) can actually reduce the claw back by more than the cost of the donation!

(In case you're thinking, that's all well and good, but how can I work out how much I need to give to a charity to achieve this on 5 April, you can make a payment in the current tax year and carry it back to the previous year, as long as you have made the payment by the time you file your return and this is before the filing deadline - just a quirk of the system!),