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Desperate for Advice Re Child Benefit/ High Income

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RunningOnFumesRunningOnFumes Forumite
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Hi, really need help desperately. Sorry its really long but I hope you can bear with me...

I have claimed child benefit for years. When DD left in the middle of A levels deciding she wanted to attend college instead, I dutifully informed HMRC and the payments stopped. When she started at college a few months later I phoned them up and they were happy to reinstate. And recently when she wanted to do overtime at her PT job because college is now closed for summer, I called them beforehand thinking we would need to stop the payments as it would probably take her over 24 hours. But they stated as long as she is in education that it was fine. I say all this to demonstrate that I have never ever intended to claim if I was not entitled to.

But here is the problem. I was aware that if you earn over £50000 you had to let them know and you got less CB or paid more tax, I am not exactly sure. I don’t understand the math. Not a problem I thought, as my salary is only few quid (less than £30) over £49000 before tax. I had worked up to this salary of course, when these rules came in I was aways off £50000 even with the car allowance.  So I was blissfully thinking I was fine. Until today, when suddenly it hit me, do I really earn £49000 or do I actually earn £51000. This is because I get a car allowance of £250 (for using my own car) every month on top of my salary. I have no idea if this £250 is taxed, I think not but it is on my payslip and is paid with my salary. I also pay pension £204 every month.  So now I am really panicking because I realise I have been in receipt of something I should not have been. Don’t ask me how I made this stupid mistake, but in my mind I just did not consider the car allowance. Whenever I was asked for my salary, whether it was a credit application or eligibility check, I would put my salary down as what is written in my letter and that has always been in my head. 

So I know that I need to contact HMRC. But I am so worried that I will be given a criminal conviction for fraud which could cost me my job. I don’t mind paying the money back - it will be tough as I have a lot of debt and I am just beginning to really deal with this debt, but I am hoping they will be reasonable by way of a payment plan but I have read some horror stories. I am most worried about the criminal conviction. My question is what is the best way of communicating this situation to HMRC and do you have any advice on what to put in the letter and what I should avoid saying. Any general advice will also be appreciated. 

Then of course, I have also been reading that if you earn over £50000, you should be doing self assessments. Which of course I have never done because I did not believe I earned over £50000. So yes, another massive problem, that I have no idea how to deal with. An probably requires its own post, but I imagine once I inform HMRC of the CB, this issue will quickly follow quite automatically.

I appreciate I am going to get some sharp responses for my own stupidity, so I will do my best to take this on the chin. But please help me. Thank you
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Replies

  • unkleunkle Forumite
    276 posts
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    Do you pay into a pension? Give money to charity?
    It's based on your taxable income, which is explained here;
    https://www.gov.uk/income-tax
    Even at 51k you'll still be entitled to the majority of the benefit. First of all work out if you do actually breach the 50k. You won't be convicted of fraud. At worst you'll have to pay back what they have overpaid you AND maybe a fine.

  • badmemorybadmemory Forumite
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    And breathe! No way as unkle said are you going to get convicted of fraud.  You should still claim the child benefit & either repay or pay through PAYE the amount that you would not have received due to your "excess income".  Look through some of the threads on here & you will see that you are way down the scale of people that have had CB & are having to pay it back.  There is even one who will pay it back because he can't face telling his wife that she can't have that money going in to her account every month.
  • calcotticalcotti Forumite
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    Information I post is for England unless otherwise stated. Some rules may be different in other parts of UK.
  • RunningOnFumesRunningOnFumes Forumite
    7 posts
    Name Dropper First Post
    MoneySaving Newbie
    Hi all

    thanks for your responses. Really appreciate it

    please can someone explain what is meant by this:
    —————
    Step 3 - take off pension contributions

    If you made a contribution to a pension scheme where your pension provider has already given you tax relief at basic rate, take off the ‘grossed-up’ amount - what you paid plus the basic rate of tax.

    So, for every £1 of pension contribution you made, take £1.25 from your ‘net income’.

    —————-

    My employer deducts 5% off my monthly salary before tax is calculated. So as I understand it this means I have already been given tax relief. So how do I “gross this up” so I can deduct it from my income. I am trying to calculate my adjusted net income manually to make sure of my facts. I do no not want to use the HMRC website just yet.

    As I understand the instructions on HMRC I must 

    • Add my income (£49023.96 + £3000 = £52023.96)
    • Less pension contributions (£52023.96 - £2451.24 = £49572.72) this is not the grossed up pension amount.
    • I also pay £120 per year for my child’s pension - she is not yet 18, so can I deduct this too?  If so, that reduces the total to £49452.72
    So is my adjusted next income £49452.72, please god I hope it is. 

    Thanks
  • edited 1 July at 1:46PM
    unkleunkle Forumite
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    edited 1 July at 1:46PM
    Just take the pension amount your employer has deducted as this already includes the tax relief.
    If so then; your salary is 49,572,72. You cannot deduct something you pay to your child.
    Do you have any P11d benefits? Healthcare etc?
  • Important update! We have recently reviewed and updated our Forum Rules and FAQs. Please take the time to familiarise yourself with the latest version.
  • RunningOnFumesRunningOnFumes Forumite
    7 posts
    Name Dropper First Post
    MoneySaving Newbie
    unkle said:
    Just take the pension amount your employer has deducted as this already includes the tax relief.
    If so then; your salary is 49,572,72. You cannot deduct something you pay to your child.
    Do you have any P11d benefits? Healthcare etc?
    Thanks @unkle. Yes my company gives me medical. On my P11d just received it says £487.13. Does this get added or deducted from the 49572.72?
  • RunningOnFumesRunningOnFumes Forumite
    7 posts
    Name Dropper First Post
    MoneySaving Newbie
    If I need to add the medical, then oh dear it takes me just over £50000. 
  • unkleunkle Forumite
    276 posts
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    https://www.gov.uk/child-benefit-tax-calculator/main
    Fill out here inc P11d values to get a net income.
  • RunningOnFumesRunningOnFumes Forumite
    7 posts
    Name Dropper First Post
    MoneySaving Newbie
    @unkle

    I am not sure what they mean by this:

    Pension contributions deducted from your pay (don't include contributions deducted before tax)
    I assume I do not include the salary sacrifice for pension here as it is deducted before I am taxed
    Pension contributions not paid from your salary (the amount you actually paid, not the grossed-up amount)
    I don’t get this - its saying I shouldn’t include deductions from my salary

    I don’t know where to put the pension salary sacrifice amount.  Its not very clear, at east to my little brain
  • RunningOnFumesRunningOnFumes Forumite
    7 posts
    Name Dropper First Post
    MoneySaving Newbie
    So I took a chance and just put the figures in and used the second option (see post above) with my medical added and according to HMRC there is no charge to pay!!! What a relief. I am so glad I have not broken any laws. I will most definitely keep on top of this now. But just to be safe I have asked my employer to increase my pension contribution slightly. This plus me monitoring it will hopefully keep me legal and if I do get a pay rise I will check again. Thank you to those who took the time to respond. I really do appreciate it. 
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