Self assessment confusion

Jaydee180

Hi,

I hope you’re all well. 

I am trying to work out whether it is worth my while continuing with extra agency work on top of my usual full-time, permanent work for the rest of the tax year. I am reaching the £50,000 threshold now with 2 1/2 months of the tax year to go, but would like to know whether the following will be deducted from my overall earnings / income as part of self assessment:

Student Loan
Pension
Heating / electric costs due to working from home during the pandemic. 

I also receive Child Benefit, so I believe I will need to pay some of this back due to my earnings. 

This is all new to me and I would greatly appreciate any info or advice. 

Many thanks! 

Dazed_and_C0nfused

Student Loan - no

Pension - almost certainly won't reduce your taxable income but would increase your basic rate tax band and be taken into account when calculating your adjusted net income (used for HICBC purposes)

Heating / electric costs due to working from home during the pandemic - do you mean actual costs or the £6/week?

Jaydee180

Thanks Dazed,

I should have mentioned that due to a complete mess of a situation with my tax banding, it was agreed that it would remain the same as before (without taking this extra income into account) and I have been nesting extra in the bank to cover the tax shortfall. Based on that info, what would that mean in terms of my pension being taken into account when completing the self assessment?  Does it make any difference at all?

Do I just look at my gross income for both jobs combined and that’s my figure regardless of pension payments and student loan? 

Dazed_and_C0nfused

I'm assuming you mean contributions to a relief at source scheme.

These work in two different ways.

For income tax they do not reduce your taxable income but they increase the amount of basic rate tax you can pay, which in turn can reduce the amount of higher rate tax payable.

For example if you contributed £8,000 then the pension company would add £2,000 tax relief and your basic rate band would be increased from £37,500 to £47,500.

For adjusted net income purposes they do get deducted so can also be beneficial for HICBC purposes.

The simplest thing to do is complete your return without the pension contribution (but don't submit it to HMRC) and look at the calculation noting the bottom line.

Then include the pension contribution and review the calculation again.  The difference is how much personal tax/HICBC the pension contribution has saved you.

Your Student Loan payments do not have any impact on your income tax liability but your Self Assessment calculation may identify additional Student Loan is payable.  You would see this on the calculation.

Jaydee180

This is incredibly helpful. Thank you so much.