Confused about Adjusted Net Income and High Income Child Benefit Charge (HICBC)

gtat

Hello,

I'm trying to work out if I am liable to pay the HICBC this financial year, and would be grateful if someone could check my calculations below. I've tried to work it out myself, but I'm very confused by the whole thing!

We have one child and this Child Benefit is paid to my wife (her salary is approx £15k PA). My salary is £63,000 PA paid through a 'net pay' arrangement and I also received a one off bonus in September from a previous job.

My understanding is that the HICBC is applicable if 'Adjusted Net Income' is over £50,000. ANI is calculated as gross salary minus pension deductions.

My 2022/23 calculations are below (includes expected pay to end of 2022/23 financial year):

Current job (Net pay arrangement)
Gross pay with pension contributions under net pay arrangement deducted: £54,888.35

Bonus paid from previous job
Gross one off payment : £3631.55
(Note: I'm not sure whether to deduct tax from this payment for the ANI calculation? The role was civil service, but I'm not sure if it was Net Pay or Relief At Source).

Contributions to SIPP
12 x £100 payments: £1200

Therefore, £54888.35 + £3631.55 - £1200 = £57,319.90.

Conclusion: I am liable to pay back nearly 75% of the Child Benefit received. Or alternatively I can contribute £7350 to a SIPP to get my ANI below the £50,000 threshold.

Questions:
1) Does the above look correct?
2) Am I including the one off 'bonus' from a previous job correctly by using the gross figure? The payslip says £3631.55 gross, with £1166.38 deducted for employee NI and income tax (342.32+824.06) and there was also employer NI of 432.47. There were no pension contributions. Net pay received was £2465.17.

Thank you!

calcotti

2) Yes, using gross is correct. Net adjusted income is total of taxable income therefore it’s gross - you can’t take tax paid off.

gtat

Thank you @calcotti. If anyone is able to sense check my workings above then that would be very helpful. Thank you

Dazed_and_C0nfused

Salary is often irrelevant for tax (and HICBC) purposes.

Your starting point appears to be taxable income of £54,888.35.  I'm assuming this is your taxable pay after net pay pension contributions have been deducted from your "salary".

You will need to include the (taxable) bonus, presumably the whole £3,631.55

Tax or National Insurance paid are an allowable deductions.  Neither are net pay pension contributions (they've already been taken into account when arriving at your taxable pay).

The gross amount of any personal SIPP contribution is deductable for HICBC purposes.  Did you actually pay £100/month or just £80?

Strictly you don't need your ANI to be under £50,000.  HICBC is only charged once ANI is £50,100 so anything under that avoids it.

And, on a separate note, don't forget higher rate relief you appear to be due on your SIPP contributions

calcotti

Dazed_and_C0nfused said:

Tax or National Insurance paid are an allowable deductions. 

Is there a  not missing in that sentence?

Dazed_and_C0nfused

calcotti said:

Dazed_and_C0nfused said:

Tax or National Insurance paid are an allowable deductions. 

Is there a  not missing in that sentence?

Yes there is 😳.  

duckson

You also need to add on any interest or dividends earned (any interest/dividents earned in ISA's can be ignored) and potentially any benefits from company health insurance, car etc.

I'm going to have to go through this at the end of this tax year!

gtat

Thank you all for your help. Very useful!

Futurehopeful

duckson said:

You also need to add on any interest or dividends earned (any interest/dividents earned in ISA's can be ignored) and potentially any benefits from company health insurance, car etc.

I'm going to have to go through this at the end of this tax year!

Sorry to hijack this thread.
I also need to complete a SA form for HICBC. 
Do you need to include interest earned on joint Bank Accounts?

calcotti

Futurehopeful said:. 

Do you need to include interest earned on joint Bank Accounts?

Half the interest would be treated as yours

Dazed_and_C0nfused

Futurehopeful said:

duckson said:

You also need to add on any interest or dividends earned (any interest/dividents earned in ISA's can be ignored) and potentially any benefits from company health insurance, car etc.

I'm going to have to go through this at the end of this tax year!

Sorry to hijack this thread.
I also need to complete a SA form for HICBC. 
Do you need to include interest earned on joint Bank Accounts?

Assuming it's not an ISA then yes you include all taxable income.

If it was a joint account in two names then you would declare 50% of the interest.