New job - tax/pension/benefit planning

HCIMbtw

For the past few years I have been making pension payments to bring my effective salary below £50k, maximising tax relief on pension contributions and claiming child benefit.

In the next couple of months I start a new job, with a better salary and perks which presents a new tax efficiency challenge - based on salary, cash equivalent car allowance, employer contributions, I will hit the annual £40k allowance for pension contributions before taking my effectively salary below £50k.. If I max £40k pension contributions my remaining salary will end up about £55k.

As such I would only be able to claim about 50% of child benefit.

Next year I'll have 2 kids so would forego about £900 a year in CB.

My wife's salary is lower than the higher rate threshold and her pension contributions are comparatively poor compared to mine.

I have a couple of different questions:

- Is there is anything we can do to keep eligibility for full child benefit? (I am pretty sure there isn't) ?  

- Wondering if there is anything we could be doing to give the high rate tax relief on pension contributions I will not be able to benefit from to my wife? (I am pretty sure this isn't possible)

I am considering just stopping the child benefit claim all together as it will become a pain to manage around potential bonus payments and salary changes. If I do this I am also considering not quite maxing out my pension contributions, maybe just make them about 35k gross. The extra take home would just be useful.

Would be interested to hear any other advice/thoughts people might have on the circumstances. 

Dazed_and_C0nfused

I don't believe there is any mechanism to allow you to only claim 50% of the Child Benefit.  It's all or nothing.  

Gift Aid contributions reduce your adjusted net income.  As does going part time.  And do you have carry forward available which might mitigate this issue in the short term?

Your wife cannot get higher rate tax relief if she isn't a higher rate payer.

HCIMbtw

Dazed_and_C0nfused said:

I don't believe there is any mechanism to allow you to only claim 50% of the Child Benefit.  It's all or nothing.  

Gift Aid contributions reduce your adjusted net income.  As does going part time.  And do you have carry forward available which might mitigate this issue in the short term?

Your wife cannot get higher rate tax relief if she isn't a higher rate payer.

Don't think you claim 50%, think you claim the full amount and then you pay a portion back that you were effectively not entitled to. But I have to do that through self assessment.. and I don't have to complete a self assessment at present (which is nice) and I hear that once you are completing self assessments that's it for life.. hence thinking to opt out of child benefit entirely 

The short term changes in job will be a little bit of a headache (maths puzzle) and I kinda need to wait to see how my final pay works out, but as I am nowhere near annual allowance in my current job I should be able to make a SIPP payment to close things off by April if there is any issue 

I'm just trying to make sure I'm not missing any opportunity

Albermarle

 I hear that once you are completing self assessments that's it for life..

Pretty sure that is not the case.

Not sure that not getting child benefit because you earn too much, is really a major problem. Being able to get it via the salary sacrifice route, is only a tax loophole which should really be closed anyway.

[Deleted User]

‘ I hear that once you are completing self assessments that's it for life’

Absolutely certain that is not the case - although your UTR is ‘for life’ unless you go bankrupt!

DE_612183

so your effective salary is +100k PA?

Dazed_and_C0nfused

HCIMbtw said:

Dazed_and_C0nfused said:

I don't believe there is any mechanism to allow you to only claim 50% of the Child Benefit.  It's all or nothing.  

Gift Aid contributions reduce your adjusted net income.  As does going part time.  And do you have carry forward available which might mitigate this issue in the short term?

Your wife cannot get higher rate tax relief if she isn't a higher rate payer.

Don't think you claim 50%, think you claim the full amount and then you pay a portion back that you were effectively not entitled to. But I have to do that through self assessment.. and I don't have to complete a self assessment at present (which is nice) and I hear that once you are completing self assessments that's it for life.. hence thinking to opt out of child benefit entirely 

The short term changes in job will be a little bit of a headache (maths puzzle) and I kinda need to wait to see how my final pay works out, but as I am nowhere near annual allowance in my current job I should be able to make a SIPP payment to close things off by April if there is any issue 

I'm just trying to make sure I'm not missing any opportunity

Self Assessment definitely isn't for life!

Carry forward is likely to be your best option

Grumpy_chap

HCIMbtw said:

In the next couple of months I start a new job, with a better salary and perks which presents a new tax efficiency challenge - based on salary, cash equivalent car allowance, employer contributions, I will hit the annual £40k allowance for pension contributions before taking my effectively salary below £50k.. If I max £40k pension contributions my remaining salary will end up about £55k.

Have your pension contributions been below £40k (employee plus employer) in any of the past three years?  Are you able to use carry forward to contribute the extra £5k you'd need to bring salary below £50k threshold?

HCIMbtw

DE_612183 said:

so your effective salary is +100k PA?

I wish, effective salary is about 83, employer pension contribution at 15%. 

HCIMbtw

Grumpy_chap said:

HCIMbtw said:

In the next couple of months I start a new job, with a better salary and perks which presents a new tax efficiency challenge - based on salary, cash equivalent car allowance, employer contributions, I will hit the annual £40k allowance for pension contributions before taking my effectively salary below £50k.. If I max £40k pension contributions my remaining salary will end up about £55k.

Have your pension contributions been below £40k (employee plus employer) in any of the past three years?  Are you able to use carry forward to contribute the extra £5k you'd need to bring salary below £50k threshold?

This is the type of information I am after! 

Yes I have never hit the annual allowance before so all preceding three years would be below the 40k annual allowance. 

Will look up carry forward details but if you've any more info to share happy to receive it!. 

HCIMbtw

Sweet from what I am reading can just carry forward and contribute more to my pension without informing the HMRC even, which is great.. and maintain child benefit entitlement, really useful to know this is an option 

Wish there was a more tax efficient way to get some of that pension into an ISA