Calculating how much AVC to pay to reduce Adjusted Net Income

Kynthia

Th3_Ripper wrote: »

Hello,

Firstly, thank-you for all of the replies it has been really interesting to hear people's opinions and suggestions.

The variance between ANI and the 50k threshold is £8,418.

Kynthia, is it as simple as removing 40% off the value of £8,418? If I am correct that reduces the amount of forfeited take home pay to £5,050?

You are of course right to highlight that I would also benefitting from keeping the CB, worth £1,788 per year.

If my numbers are correct (big if ) my take home pay would be £3,262 less per year.

Does that sound right?

I haven't looked into it in depth so I wouldn't want to tell you something wrong, but if your ANI is taxable income then you would pay tax on it. That £8,418 would incur 40% tax so you'd only get 60% of it in your take-home pay (£5,051).

Divide by 100 to get the percentage of child benefit you risk losing, and I'm assuming it's the taxable figure exceeding £50k we use, to give 81%. That is £1,449.

So my basic calculation shows you can keep £5,051 of pay and £340 of child benefit. Or not have any of that pay, keep £1,789 of child benefit and have an extra 8,418 invested in your pension and growing for your retirement. The former option means you have only £3,602 more in your bank account this year, and nothing extra in your pension.

Hopefully if I've misunderstood or made a maths mistake someone will correct me. If I'm right though, giving up £3,602 in order to have £8,418 in my pension and growing for a couple of decades, seems fantastic value and too good to miss. However everyone's circumstances are different.