Pension health

pensionConfusion

Sorry but I have no idea what you are trying to say. My spouse makes 78k before tax.
My kids are 7 and 11. What child benefit are you talking about ?

Triumph13 wrote: »

It looks on those numbers as though your spouse must be well into the higher rate tax band to get to £6k a month coming in. Depending on spouses salary and number / ages of kids you MAY get a lot more bang for your buck making contributions in their name if it means you get to keep your child benefit eg with 2 kids CN clawback adds 18% to marginal tax rates between £50k and £60k.

Dazed_and_confused

This,

https://www.litrg.org.uk/tax-guides/tax-credits-and-benefits/child-benefit

If she receives Child Benefit and isn't filing Self Assessment returns then she can expect a bill from HMRC when they catch up with her.

JoeCrystal

pensionConfusion wrote: »

Sorry but I have no idea what you are trying to say. My spouse makes 78k before tax.
My kids are 7 and 11. What child benefit are you talking about ?

Child Benefit is a series of welfare payments made to parents with children in the UK,

pensionConfusion

I don't believe we have been receiving this. We were non UK resident for 7 years and only just returned.
My spouse has filed tax returns for all these years. Even I have with 0 income and nothing has been flagged up by HMRC.

JoeCrystal wrote: »

Child Benefit is a series of welfare payments made to parents with children in the UK,

Triumph13

pensionConfusion wrote: »

Sorry but I have no idea what you are trying to say. My spouse makes 78k before tax.
My kids are 7 and 11. What child benefit are you talking about ?

If your spouse made pension contributions to get that down to £50k then you would be eligible to claim child benefit for your kids which would pay you £137.60 every 4 weeks tax free. That drops to £82.80 when your oldest finishes school and finishes when the younger one finishes school. You get it in full as long as neither of you has taxable income over £50k. You lose 10% of it for every £1k earned over the threshold until it's all gone for someone earning £60k.
If your partner pays £28k gross into a SIPP the net cost is therefore just 60% of the £28k, less the child benefit you get to claim so the next cost is only £15k to get £28k into spouse's pension.

JoeCrystal

pensionConfusion wrote: »

I don't believe we have been receiving this. We were non UK resident for 7 years and only just returned.
My spouse has filed tax returns for all these years. Even I have with 0 income and nothing has been flagged up by HMRC.

Ah, that would explain a great deal. No worries, we are always happy to help out with any pension questions you got. Although you should think about cutting that £5000 per month expense somehow! :eek::)

Dazed_and_confused

Going of the posts on various MSE boards there are plenty of people with taxable income well in excess of £50,000 who don't have to pay the High Income Child Benefit Charge.

HICBC is calculated on adjusted net income so relief at source pension contributions, which do not reduce your taxable income, can bring your ANI down to £50k or less.

pensionConfusion

If your partner pays £28k gross into a SIPP the net cost is therefore just 60% of the £28k, less the child benefit you get to claim so the next cost is only £15k to get £28k into spouse's pension.

Can you please elaborate this point. Mathmatically. How do you get the numbers.
My spouse will have to sacrifice 28k to get below 50k. And 28k should add a bigger amount to the SIPP/company pension and we get to add the Child benefit on top. Right? I dont think I get what you are saying.

Triumph13 wrote: »

If your spouse made pension contributions to get that down to £50k then you would be eligible to claim child benefit for your kids which would pay you £137.60 every 4 weeks tax free. That drops to £82.80 when your oldest finishes school and finishes when the younger one finishes school. You get it in full as long as neither of you has taxable income over £50k. You lose 10% of it for every £1k earned over the threshold until it's all gone for someone earning £60k.
If your partner pays £28k gross into a SIPP the net cost is therefore just 60% of the £28k, less the child benefit you get to claim so the next cost is only £15k to get £28k into spouse's pension.

Triumph13

pensionConfusion wrote: »

If your partner pays £28k gross into a SIPP the net cost is therefore just 60% of the £28k, less the child benefit you get to claim so the next cost is only £15k to get £28k into spouse's pension.

Can you please elaborate this point. Mathmatically. How do you get the numbers.
My spouse will have to sacrifice 28k to get below 50k. And 28k should add a bigger amount to the SIPP/company pension and we get to add the Child benefit on top. Right? I dont think I get what you are saying.

Okay, fasten your seatbelt!
Spouse pays £22,400 to the SIPP provider = 80% of £28k. Provider reclaims £5,600 from HMRC being the usual basic rate tax uplift that providers can claim. Spouse phones up HMRC, tells them about the contribution and they send him/her a cheque for £5,600 of higher rate tax relief getting spouse's net cost down to £16,800. You contact the child benefit people and ask them to pay you child benefit which pays you £1,800 a year. I'm not sure if you can backdate the claim to the start of the tax year or not.

ETA a quick google says you can backdate the child benefit claim for 3 months only. You might as well get the claim in immediately as even if you don't go down the SIPP route you don't lose anything as you get the benefit and spouse repays it after the end of the year in his tax return if you haven't managed to get spouse's income down.

Dazed_and_confused

£28k gross into a SIPP is a net payment of £22,400 plus £5,600 basic rate tax relief added by the pension company (courtesy of HMRC).

The £28k increases the amount of basic rate tax she can pay (it does not reduce her taxable income) which in turn can reduce the amount of higher rate tax payable. Potentially saving £5,600 in income tax (£28,000 taxed at 20% instead of 40%).

If she has the highest adjusted net income out of the pair of you and this is less than £50,100 then no High Income Child Benefit Charge would be payable.

So she could get £1,788 in Child Benefit.

This all means a £28,000 pension fund could be seen as having cost,

£22,400 less £5,600 personal tax savings and £1,788 Child Benefit = £15,012.