AVC Calculator?

stevedresden

Are there any AVC calculators online that would allow me to figure out how much AVC I have to make to keep my salary below £50k (for child benefit purposes) and crucially what impact that might have on my net pay?

I somehow managed to fluke it this year through finger in the air guessing and came in at £49.8k, but I'd rather do it more scientifically in future

TIA

[Deleted User]

An AVC payment by you will increase your basic rate band and reduce your adjusted net income by 1.25 times that payment. 

So, if your adjusted net income was £52000, a payment of £1600 would reduce it to £50000.

stevedresden

[Deleted User] said:

An AVC payment by you will increase your basic rate band and reduce your adjusted net income by 1.25 times that payment. 

So, if your adjusted net income was £52000, a payment of £1600 would reduce it to £50000.

Thanks - so if I get a bonus at some point of £2500, an AVC of £2000 would be the correct adjustment?

[Deleted User]

stevedresden said:

[Deleted User] said:

An AVC payment by you will increase your basic rate band and reduce your adjusted net income by 1.25 times that payment. 

So, if your adjusted net income was £52000, a payment of £1600 would reduce it to £50000.

Thanks - so if I get a bonus at some point of £2500, an AVC of £2000 would be the correct adjustment?

It would. You would have to claim the additional 20% tax relief of £500. 

However if your taxable income is £49800 plus £2500 bonus only £2030 is taxable at 40% and only £406 additional relief is claimed.

stevedresden

Thanks. Sorry what does you mean by "i would have to claim the additional tax relief"? I have to physically do something? I'm on PAYE through my employer and I assumed that they sorted this out

[Deleted User]

stevedresden said:

Thanks. Sorry what does you mean by "i would have to claim the additional tax relief"? I have to physically do something? I'm on PAYE through my employer and I assumed that they sorted this out

They won’t - nothing to do with them. 

On the example used: 

£2000 is contributed by you. BASIC rate tax relief is claimed by the pension provider which makes the gross contribution £2500. £2500 less 20% tax relief is £2000. 

However, the whole point is to avoid higher rate tax - HMRC don’t know that you have made a pension contribution. 

Your income is £52300.

As it stands you will pay 40% tax on income above £50270.

12570 tax free. 
37700 at 20% 
£2030 at 40%

Total tax £8352.

When you inform HMRC the  threshold will be  extended by £2500 to £52770. 

Your income of £52300 will be taxed: 

12570 tax free. 

39730 at 20%

Total tax £7946. 

Tax repayable £406.

Moreover - your pension pot has increased by £2500 but your net cost is £1594.

If you continue to make such contributions in the future HMRC will adjust your tax code to avoid you having to make such claims in the future - obtaining the higher rate relief through your salary. They will assume similar contributions and you need to monitor this through your personal tax account. 

stevedresden

When you inform HMRC the  threshold will be  extended 

Next silly question - how do I inform HMRC?