Pensions and child benefit offsetting

aj9648

Hi

I wasn’t sure whether to post this here or in benefits....but anyway recently I had a pay rise which put me above the £60k mark. I understand this means I am not entitled to child benefit. Can I off set by putting into SIPP? Thus bringing my ‘income’ down and still being entitled to CB?

Thanks

Johnnyboy11

Yes, that's what I did, ever since the Child Benefit Tax was introduced. £50k 'Relevant UK Earnings' is the threshold you need to get below.

tacpot12

Yes you can. If you make a payment to a SIPP of 80% of the amount your earn over £50,000 you will avoid all the tax charge, you would also receive some higher rate tax back.

xylophone

https://www.theguardian.com/society/2018/sep/01/high-earner-tax-penalty-child-benefit-50000-salary-pension

aj9648

I just wanted to understand the meaning of relevant UK earnings - my latest payslip was:

Salary- £5416
Child care - £243
Pension - £460
Total Gross Pay - £4713
Benefit in kind health care - £110

Tax - £1019
Car - £95
Charity - £5
Health care - £27
NI - £396
Total Deductions - £1544

What can be deducted from salary to calculate to calculate the 'relevant UK earnings'? - is it just the pension element?

And then contribute to a SIPP which I already do to get down to less the £50k

dont_use_vistaprint

I'm not sure how benefits in kind an childcare are treated but you can increase pension or gift aid by 5th April 2019 to bring your earnings below 60, or just below 50 if you wanted to keep it all - depends on number of kids and how much you can sacrifice monthly income for pension.

Depending on when you got your rise will affect how much over 50 or 60 you are this tax year year. You can track it online in your personal tax account. Self Assessment works out the bill for you, based on dates as they leave full time education etc

I think its better to carry on claiming and then pay it back by 31st Jan 2020 as you can earn interest on it and also you may do some "consulting" before April and have some costs to add.

xylophone

Re relevant earnings

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100

Dazed_and_confused

The High Income Child Benefit Charge is caulcted based on your "adjusted net income" which means you could have taxable income of say £70k but still be entitled to retain full Child Benefit if sufficient Gift Aid or relief at source pension contributions are made.

There is more information on gov.uk, just Google adjusted net income.

Salary is irrelevant, your P60 pay figure is much more important, particularly if you are in a company pension scheme i.e. salary £60,000 less 10% pension deduction = £54,000 taxable pay

dont_use_vistaprint

Dazed_and_confused wrote: »

The High Income Child Benefit Charge is caulcted based on your "adjusted net income" which means you could have taxable income of say £70k but still be entitled to retain full Child Benefit if sufficient Gift Aid or relief at source pension contributions are made.

That would be quite a challenge for most people! I cant quite get my head around the maths re grossed-up amounts and existing tax claimed on Gift-Aid, but, taking a £70,000 gross salary, would this literally mean paying £20,000 in pensions and Gift Aid ?


The advice says:
Step 2 - take off Gift Aid donations
If you made a Gift Aid donation, take off the ‘grossed-up’ amount - what you paid plus the basic rate of tax. So, for every £1 of Gift Aid donations you made, take £1.25 from your net income.

I assumed online self assessment does this calculation automatically as the figures I used were not £1.25 per £1 , but the actual amount I gift aided - is this correct ?

zagfles

dont_use_vistaprint wrote: »

That would be quite a challenge for most people! I cant quite get my head around the maths re grossed-up amounts and existing tax claimed on Gift-Aid, but, taking a £70,000 gross salary, would this literally mean paying £20,000 in pensions and Gift Aid ?


The advice says:
Step 2 - take off Gift Aid donations
If you made a Gift Aid donation, take off the ‘grossed-up’ amount - what you paid plus the basic rate of tax. So, for every £1 of Gift Aid donations you made, take £1.25 from your net income.

I assumed online self assessment does this calculation automatically as the figures I used were not £1.25 per £1 , but the actual amount I gift aided - is this correct ?

For gift aid you put the amount actually given, and the calculation will automatically gross it up for instance if you gave £1000 enter £1000 and it'll add £1250 to your basic rate band.

For pension conts you enter the gross amount for instance if you contributed £1000 (net) to a SIPP enter £1250 which is the gross contribution.