Help on child benefit tax

kevj9201

Hi, this year my income with employment, self employment and property income will be £52400, of which £3500 is mortgage interest but is added on taking me over the £50K mark. 

I believe that if I put £2500 into a private pension will that take my adjusted income below the £50K threshold so won’t have to pay child benefit tax? 

Do I claim the tax relief at the pension provider or not and if so what figure do I put on my tax return? £2500 or £3125? 

Thanks
Kevin

MattMattMattUK

kevj9201 said:

Hi, this year my income with employment, self employment and property income will be £52400, of which £3500 is mortgage interest but is added on taking me over the £50K mark. 

I believe that if I put £2500 into a private pension will that take my adjusted income below the £50K threshold so won’t have to pay child benefit tax? 

Do I claim the tax relief at the pension provider or not and if so what figure do I put on my tax return? £2500 or £3125? 

Thanks
Kevin

Do you already have a pension, a employee scheme, a private pension from self employment? Usually the most efficient route would be to do this through your work scheme as they likely make some element of matching contribution, are you able to make additional lump sum payments and could you do this now from your March pay run?

kevj9201

Hi, I already have a work place pension. I am just wanting to get my adjusted net income below £50k by putting some money into a private pension. 

[Deleted User]

kevj9201 said:

Hi, I already have a work place pension. I am just wanting to get my adjusted net income below £50k by putting some money into a private pension. 

On your other question - you would enter 3125

kevj9201

[Deleted User] said:

kevj9201 said:

Hi, I already have a work place pension. I am just wanting to get my adjusted net income below £50k by putting some money into a private pension. 

On your other question - you would enter 3125

Thanks, having never done it before I can’t get my head round it, will I still pay income tax on the £2500 on my tax return but will avoid the child benefit tax? 

[Deleted User]

The £2500 that you pay will extend the amount before which you pay tax at the higher rate by £3125 and reduce your adjusted income by the same amount. If your total income is indeed £52400, a contribution to a personal pension scheme of £1800 will be sufficient. Does the £52400 include gross salary or salary after company pension contributions made by you?

kevj9201

Thankyou for your explanation, that is what I was hoping it would be but I still don’t get how I don’t get taxed on the £2500 and I also get the 25% additional pension contribution! The £52400 is after my pension contributions from my wage. 

Dazed_and_C0nfused

You cannot avoid being taxed on it unless you (salary) sacrifice it into an employer pension contribution.

But you can change the tax rate from 40% to 20% by increasing your basic rate band.

You can do this by making a "relief at source" pension contribution to a SIPP or personal pension.

For example you pay £2,000 and the pension company adds basic rate tax relief of £500 so you have a pension fund of £2,500.

And your basic rate band is increased by £2,500.

And your adjusted net income (which the HICBC is based on) is reduced by £2,500.

Also, it may just be terminology but this is wrong,

Hi, this year my income with employment, self employment and property income will be £52400, of which £3500 is mortgage interest but is added on taking 

kevj9201

Thanks, think I get it. With regards the mortgage interest I know I’ll get tax relief on that but it goes on my adjusted income which means I’ll be above the £50K for HICBC won’t I? 

Jeremy535897

I think you are saying that the mortgage interest does not reduce your rental income for tax purposes (including adjusted net income). This is correct. You simply deduct a 20% tax credit from the income tax due.