Adjusted net income for Child Benefit

momo12

Hi all,

I was hoping someone could put me right with the calculations regarding adjusted net income please.

If I were to have a salary of £60k per year, would I need to ensure that my taxable income was below £4166 per month (£50k/12). I could do this by paying increase my salary sacrifice pension contributions to 24% I believe. I have no other income or potential deductions.
Is that right?
Many thanks 

calcotti

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

momo12

Thank you but I don't quite understand it and I think my maths above is wrong actually. 

I was just hoping someone could give me information in a form I could understand please.

So my salary is 60k, per month that's a gross of 5k. Do I need to increase my salary sacrifice pension to 17% to bring my taxable down to £4150 per month? That would be an annual taxable income of £49800 and therefore under the 50k limit?

momo12

Or do I subtract the tax free portion of my gross pay? So although my salary is 60k is my taxable income is 60000-12570?

Dazed_and_C0nfused

No, your taxable income is £60,000 as you cannot deduct the Personal Allowance when calculating adjusted net income or the High Income Child Benefit Charge.

Your salary isn't relevant for any of this, it's your taxable pay and adjusted net income which matters.

You need to add all taxable income even if it is taxed at 0% so interest and dividends need including.

You cannot deduct salary sacrifice pension contributions as these are paid by your employer and are therefore not deductable.

As an example say your taxable pay is £49,800 and you have interest of £400 and dividends of £300 so your taxable income is £50,500.  If you don't make any pension contributions or Gift Aid donations then your adjusted net income is £50,500 and you would pay a 5% High Income Child Benefit Charge.

NB.  If your salary is £60,000 and you sacrifice 17% into employer pension contributions then your taxable pay, the starting point for ANI, would be £49,800. 

momo12

Thanks very much for that, really well explained.
I'm sure I understand that now but to make sure:
A salary of £70,000 with a sacrifice of 28% into employer pension contributions would be a taxable income of £50,400. Assuming I have no other additions or deductions that would be my ANI. Therefore I would have to pay 4% back to child benefit?

Is that right?

Dazed_and_C0nfused

momo12 said:

Thanks very much for that, really well explained.
I'm sure I understand that now but to make sure:
A salary of £70,000 with a sacrifice of 28% into employer pension contributions would be a taxable income of £50,400. Assuming I have no other additions or deductions that would be my ANI. Therefore I would have to pay 4% back to child benefit?

Is that right?

Yes.  Remember you actually need ANI to drop to £50,099 to avoid HICBC as the 1% is only due at £50,100 😊.

One thing worth checking with your employer is that the % sacrificed is based on 100% of your pay.

Under auto enrolment rules some pay can be ignored before pension deductions are taken.  

https://www.thepensionsregulator.gov.uk/en/employers/new-employers/im-an-employer-who-has-to-provide-a-pension/declare-your-compliance/ongoing-duties-for-employers-/earnings-thresholds

momo12

Brilliant, thanks very much for your help on that. 
Yes I'm pretty sure it will be 100% of my pay but will check!
Have a good weekend!