Child Benefit Entitlement, increase in earnings confused

SpoonKat

Hello all, 

Currently get CB for one child, I earn £32,000 and DH earns £50,000 and makes pension contribution of 5% which works out as deduction from his earnings per month of £166.60 plus 20% tax relieft £41.67 total £208.33. So currently below the £50,000 threshhold, due to his pension contributions,

he is due to start new job where he will get £55,000 so am trying to work out if increase pension can we remain on CB? and what contribution would it be, when they work out pension deductions is it on the £166.60 in the above example or £208.33 ie do they add the 20% tax relief? as on £55k if he say pays only 5% again this will not bring him below 50,000 I think he would either have to pay 11% ie £404.16 deduction and £100 tax relief or 12 % ie £400 and £110 tax relief, 

On a salary calculator i worked out £55,000 pension contribution of 12 % -- £440 from salary = £5,280 deduction bringing it under £50k is about £3,139.28 per month plus CB 87.20 = £3,262,48 where as if did a 5% deduction would be 183.33 per monrh and £3,302.46 net pay less CB £87.20 = £3215.26 , therefore worse off?
i am getting confused as to whether it is worth uping the pension contribution to such a high amount or leaving it manageable? help please to figure it out 

calcotti

You only lose all of the CB at £60,000. Between £50,000 and £60,000 he will have to pay some back.

Guidance on adjusted net income here
https://www.gov.uk/guidance/adjusted-net-income

There's a calculator here
https://rossmartin.co.uk/calculators/6557-adjusted-net-income-calculator

Dazed_and_C0nfused

SpoonKat said:

Hello all, 

Currently get CB for one child, I earn £32,000 and DH earns £50,000 and makes pension contribution of 5% which works out as deduction from his earnings per month of £166.60 plus 20% tax relieft £41.67 total £208.33. So currently below the £50,000 threshhold, due to his pension contributions,

he is due to start new job where he will get £55,000 so am trying to work out if increase pension can we remain on CB? and what contribution would it be, when they work out pension deductions is it on the £166.60 in the above example or £208.33 ie do they add the 20% tax relief? as on £55k if he say pays only 5% again this will not bring him below 50,000 I think he would either have to pay 11% ie £404.16 deduction and £100 tax relief or 12 % ie £400 and £110 tax relief, 

On a salary calculator i worked out £55,000 pension contribution of 12 % -- £440 from salary = £5,280 deduction bringing it under £50k is about £3,139.28 per month plus CB 87.20 = £3,262,48 where as if did a 5% deduction would be 183.33 per monrh and £3,302.46 net pay less CB £87.20 = £3215.26 , therefore worse off?
i am getting confused as to whether it is worth uping the pension contribution to such a high amount or leaving it manageable? help please to figure it out 

There is no financial limit where you have to stop getting Child Benefit.

You can always get it but in some situations some or all of it might need to be paid back (the High Income Child Benefit Charge).

His earnings isn't the only consideration, you have to include all taxable income, even if it is interest or dividends which can be taxed at 0%.

But let's say his total taxable income is £55,300 (earnings of £55,000 and interest of £300).

He needs to reduce his adjusted net income by £5,201 to avoid the HICBC (55,300 - 5201 = 50,099).

Assuming he continues to contribute using the relief at source (RAS) method then he would have to personally contribute 7.6% of his earnings.

55,000 X 7.6% = 4,180
4,180 + 25% = 5,225

Taxable income £55,300 less £5,225 gross pension contribution = £50,075.

In pension terms 7.6% isn't huge so he may wish to contribute more.

He will also be entitled to some higher rate tax relief.  This comes back to him, it doesn't get added to his pension fund.  RAS contributions increase the amount of 20% tax you can pay, avoiding some 40% tax.

SpoonKat

Dazed_and_C0nfused said:

SpoonKat said:

Hello all, 

Currently get CB for one child, I earn £32,000 and DH earns £50,000 and makes pension contribution of 5% which works out as deduction from his earnings per month of £166.60 plus 20% tax relieft £41.67 total £208.33. So currently below the £50,000 threshhold, due to his pension contributions,

he is due to start new job where he will get £55,000 so am trying to work out if increase pension can we remain on CB? and what contribution would it be, when they work out pension deductions is it on the £166.60 in the above example or £208.33 ie do they add the 20% tax relief? as on £55k if he say pays only 5% again this will not bring him below 50,000 I think he would either have to pay 11% ie £404.16 deduction and £100 tax relief or 12 % ie £400 and £110 tax relief, 

On a salary calculator i worked out £55,000 pension contribution of 12 % -- £440 from salary = £5,280 deduction bringing it under £50k is about £3,139.28 per month plus CB 87.20 = £3,262,48 where as if did a 5% deduction would be 183.33 per monrh and £3,302.46 net pay less CB £87.20 = £3215.26 , therefore worse off?
i am getting confused as to whether it is worth uping the pension contribution to such a high amount or leaving it manageable? help please to figure it out 

There is no financial limit where you have to stop getting Child Benefit.

You can always get it but in some situations some or all of it might need to be paid back (the High Income Child Benefit Charge).

His earnings isn't the only consideration, you have to include all taxable income, even if it is interest or dividends which can be taxed at 0%.

But let's say his total taxable income is £55,300 (earnings of £55,000 and interest of £300).

He needs to reduce his adjusted net income by £5,201 to avoid the HICBC (55,300 - 5201 = 50,099).

Assuming he continues to contribute using the relief at source (RAS) method then he would have to personally contribute 7.6% of his earnings.

55,000 X 7.6% = 4,180
4,180 + 25% = 5,225

Taxable income £55,300 less £5,225 gross pension contribution = £50,075.

In pension terms 7.6% isn't huge so he may wish to contribute more.

He will also be entitled to some higher rate tax relief.  This comes back to him, it doesn't get added to his pension fund.  RAS contributions increase the amount of 20% tax you can pay, avoiding some 40% tax.

Thank you , so if he does pay enough in pension he wont have to pay anything back and presumably we do nothing? 
do you know how he claims the higher rate tax relief? 
thanks 

Dazed_and_C0nfused

If he has to complete Self Assessment returns (mandatory if he has to pay any HICBC, however small) then he just includes the details on his tax return.

If not he just needs to notify HMRC and they will adjust his tax code or send a refund if the tax year has finished.

He should make it clear what the gross RAS contribution is and providing an estimate of what he expects to pay on the next year would be a good idea.

If his income has changed he could also supply an estimate of what his taxable earnings will be (the pay figure he expects his P60 to show).