Single mum earning just over child benefit high incomethreshold

sarah6666

My taxable pay is £54k working in the nhs. Been sent tax demand and warning of fine due to child benefit received. Feel bitter that receive no financial support from my child’s father yet being penalised and also pay 40% tax- not really worth working full time yet work busier than ever and unable to consider working partime. My child not getting much school work sent online and I’m too tired to nag him to email his teachers yet fear he will get behind. Other mums not working so able to supervise their teenagers school work. How can I work out how much less to work to not trigger this penalty ? Also to avoid 40% income tax ? Currently earn £31.187 per hour and work 37.5 hours per week equates to £54031 per year taxable pay .

[Deleted User]

OK - knowing something about the pension scheme, it looks like you are paying 12.5%. 
You could reduce your hours to 35 per week and your take home pay, after tax, NI and pension will reduce by about £35 per week. Is this less than your child’s benefi?. Your pensionable pay for calculation of your final pension will remain at the £60k ish that you currently earn but, for each year that you work, only 0.933 of a year will be added to your service length. 

Other than taking out an additional private pension (£3200 or so per year grossed up to £4000 by HMRC) or giving money away to charity, I don’t see any other options.

xylophone

AVCs ?  https://www.nhsbsa.nhs.uk/member-hub/increasing-your-pension/money-purchase-additional-voluntary-contributions-mpavc
https://adviser.royallondon.com/technical-central/pensions/state-benefits-pension-manuals/child-benefit-avoiding-the-tax-charge/

Dazed_and_C0nfused

You don't actually need to reduce your taxable pay as the High Income Child Benefit Charge is based on adjusted net income, not taxable income.

A popular option on this situation would be to contribute £3,200 to a personal pension or SIPP.  The pension company will add £800 basic rate tax relief (courtesy of HMRC) giving you a pension fund of £4,000.

Your basic rate tax band will increase by £4,000 so you pay more 20% tax and less 40%, a personal tax savings of £800 (£4,000 x 20%).

And your adjusted net income will be reduced by £4,000 taking you out of being liable to the High Income Child Benefit Charge (this actually becomes payable when your adjusted net income hits £50,100 not £50,000).

With one child you will be getting Child Benefit of £1095 in the current tax year so without the extra pension contribution you would be liable to a High Income Child Benefit Charge of £438.

The overall end result is you have a personal pension fund of £4,000 for a net cost of just £1,962 (£3,200 initially paid out less £1,238 personal tax/HICBC saving).

[Deleted User]

Yes - Dazed. I trust that it did not come across that the op should reduce income and hours. It was one suggestion among all I could think of, including yours.