High income child benefit tax charge

furgy2000

Hi

Does anyone know if i need to deduct pension contributions from my income when calculating the high income tax charge? for example if my income was £50,400 but i made £4000 worth of pension contributions over the year would i need to pay the charge? The HMRC self assessment and calculator is very confusing so any help would be appreciated

thanks 

Dazed_and_C0nfused

It all depends on what method is used for the pension contributions.

There are four normal options and two would be deducted and two wouldn't.  

Which of these methods did your contributions fall under?

Net pay

Relief at source
Gross lump sum (with no tax relief at point of payment)
Salary sacrifice

furgy2000

I'm guessing net pay but i am not entirely sure? on my payslip pension contributions are in my deductions column below tax and national insurance

Dazed_and_C0nfused

Then you cannot deduct them.

That is because they have already been deducted when calculating your taxable pay (P60 pay figure) so deducting them again would be double counting.

For example,
Salary £60,000
10% net pay pension contributions £6,000
Taxable pay = £54,000

If you deducted them you would end up with £48,000 when the correct figure is £54,000.

furgy2000

ok thanks for that, it's really helpful

OldSmithy

I think it is worth double checking this. My payment into my employers scheme also appears under the deductions column on the payslip as clearly it is a deduction. However, it is a relief at source deduction with the tax relief being claimed by the pension provider. 

My adjusted income takes into account the payment and tax such that it reduces my pay (adjusted) for child benefit purposes. 

Apologies if I’ve misunderstood as I’m no expert but I wouldn’t want you to miss out equally. 

Pennywise

To be certain, you need to look at the "taxable pay to date" figure on your payslips.  That's the figure that HMRC use for child benefit.  If you compare the figures on two consecutive payslips, and take the difference, you should be able to work out whether the pension deduction has been deducted from taxable pay or not.  If it's been deducted, then no more relief as it's been fully given at source, but if it's not been deducted, it's coming off "take home/net pay", so the equivalent gross needs to be deducted from your taxable pay for child benefit purposes.