Calculating Adjusted Net Income

LReido

Hi

I've received a letter from HRMC asking if I need to pay the High Income Child Benefit Charge. I've a few questions about calculating adjusted net income.

My husband is the full time homemaker and the child benefit is in his name. Due to overtime payments I am over the £50000 salary limit for the year in question.

From the money I earn we pay towards a private pension for him in his name. Can we count that as an allowable deduction?

My husband has a small share holding which he receives dividend payments on twice a year that are ploughed back in to buy more shares. The shares are in his name . Should we detail that dividend in other income before tax?

Finally, what will they require to prove gift aid payment. I have several monthly direct debits set up to charities which they can claim gift aid on. I have the details of these in a spreadsheet...would that spreadsheet and a bank statement showing these donations going out be enough?

I had no notion that I was liable for this and no notion that i should have been completing a self assessment tax return therefore the documentation on proving some of this is causing me concern...as is the bill I am going to be hit with and penalty :-(

Any assistance would be much appreciated.

calcotti

You may find the information you need on the HMRC pages
Try here https://www.gov.uk/guidance/adjusted-net-income

Pension contributions can be deducted - but I don’t know if the fact that you are making them for your husband makes a difference.

Dividends will have to be declared as income even though they are reinvested.

I don’t think you are normally required to prove Gift Aid contributions unless HMRC specifically ask you for it.

If in doubt it would be best to ring HMRC.

Alice_Holt

The Cutting Tax forum may be able to better inform you on tax issues than posters on this Benefits forum.

https://forums.moneysavingexpert.com/forumdisplay.php?f=22

You may also find the search option helpful i.e
https://forums.moneysavingexpert.com/discussion/5873293/adjusted-net-income&highlight=calculating+adjusted+net+income

Very much doubt if you can claim additional pension relief on contributions you make to your husbands SIPP. He is a separate tax entity.
His dividends will be subject to his own tax position - they don't need to be reported on yours.

Does the transfer of marriage tax allowance apply in your circumstance?
https://www.which.co.uk/money/tax/income-tax/tax-rates-and-allowances/marriage-allowance-explained-a5zku9t98m3j
Could that be used?

Charitable donations will reduce taxable income - detail them on the SA form. Proof is not generally needed.

Probably too late now, but your own pension contributions would clearly reduce your taxable income. A 40% uplift really is a no brainier (esp if it also enables you to retain full CB).
It is also a good idea to review your tax position for the current tax year around December time, and consider increasing pension contributions.

Dazed_and_confused

Pension contributions can be deducted - but I don’t know if the fact that you are making them for your husband makes a difference.

Not totally correct. Some pension contributions can be deducted but not all.

It depends on what type of contribution is being made, the op will need to clarify this.

The husband's contributions cannot be deducted.

Dividends will have to be declared as income even though they are reinvested

Why would the op take into account the husband's dividend income?

Charitable donations will reduce taxable income - detail them on the SA form. Proof is not generally needed.

Gift Aid payments do not reduce taxable income. They increase the amount of taxable income which can be taxed at the basic rate of tax, which in turn can reduce the amount taxed at the higher rate.

Gift Aid payments do however reduce adjusted net income.

Probably too late now, but your own pension contributions would clearly reduce your taxable income.

Not all pension payments reduce taxable income.

They usually do reduce adjusted net income however some don't do that either (unless you use a very long winded method of calculating adjusted net income)

calcotti

Dazed_and_confused wrote: »

Why would the op take into account the husband's dividend income?)

Quite right - I overlooked that it was the husband’s.

LReido

Thanks for all your responses, they have really helped.