Reducing tax ?

2oxb1ulm2ke6

daveaspy said:

2oxb1ulm2ke6 said:

daveaspy said:

2oxb1ulm2ke6 said:

About private pension contribution there's a small issue here.

Myself (i'm winning more £55K this year) and my employer it's paying my pension contribution from my NET income.

My partner (winning £30k this year) and employer paying the pension contribution from GROSS income.

I would love to keep the child's benefit, but that means we need to pay something like £35k into private pension and then to have only £50k Gross income, it's that right ?

How should we do , in order to keep the child's benefit ?

It is the highest earner that has to repay the child benefit if they earn more than 50k - it is not based on combined income.

Your partner earns less than 50k so their pay isn't counted in this matter.

Your pay is 55k, which is over the limit so it is your responsibility and only your wage matters. You only need to contribute a small amount to a pension to get under the 50k limit.

Does it matter if I do not take the child's benefit ?

The child's benefit have been setup by my partner (the children's mother).

So i do not receive that, she's receiving the money, or it doesn't matter ?

no it doesn't matter who claims the child benefit - it is a quite ridiculous rule, as you are discovering

My wife claims the benefit for our children, but I earn more so it's my responsibility to repay if I earn over 50k

People are rightly upset that this means a couple can earn 50k each (so 100k in the household) and not have to repay any child benefit, while some might have one person earning 60k and the other nothing yet they have to repay all the child benefit.

Come on, you're totally right on this one !

Albermarle

Myself and my partner we are both have a £85k income this year

I think there is a misunderstanding by some posters ( including me ) . We read this as that you are both earning £85K ( so £170K in total) .

However later posts show that you earn ( not win ) £55K and your partner £30K.

Dazed_and_C0nfused

Albermarle said:

Myself and my partner we are both have a £85k income this year

I think there is a misunderstanding by some posters ( including me ) . We read this as that you are both earning £85K ( so £170K in total) .

However later posts show that you earn ( not win ) £55K and your partner £30K.

Well spotted!' I definitely thought it was £170k combined income.

If total taxable income of the higher earner is sub £60k then pension contributions will be extremely tax efficient in avoiding HICBC and higher rate tax.

2oxb1ulm2ke6

Dazed_and_C0nfused said:

Albermarle said:

Myself and my partner we are both have a £85k income this year

I think there is a misunderstanding by some posters ( including me ) . We read this as that you are both earning £85K ( so £170K in total) .

However later posts show that you earn ( not win ) £55K and your partner £30K.

Well spotted!' I definitely thought it was £170k combined income.

If total taxable income of the higher earner is sub £60k then pension contributions will be extremely tax efficient in avoiding HICBC and higher rate tax.

But my pension contribution are being paid of from my NET income, it's that still okay to go ahead with ?

Strummer22

2oxb1ulm2ke6 said:

Dazed_and_C0nfused said:

Albermarle said:

Myself and my partner we are both have a £85k income this year

I think there is a misunderstanding by some posters ( including me ) . We read this as that you are both earning £85K ( so £170K in total) .

However later posts show that you earn ( not win ) £55K and your partner £30K.

Well spotted!' I definitely thought it was £170k combined income.

If total taxable income of the higher earner is sub £60k then pension contributions will be extremely tax efficient in avoiding HICBC and higher rate tax.

But my pension contribution are being paid of from my NET income, it's that still okay to go ahead with ?

Is the 55k income after your pension contributions are taken off?

2oxb1ulm2ke6

Strummer22 said:

2oxb1ulm2ke6 said:

Dazed_and_C0nfused said:

Albermarle said:

Myself and my partner we are both have a £85k income this year

I think there is a misunderstanding by some posters ( including me ) . We read this as that you are both earning £85K ( so £170K in total) .

However later posts show that you earn ( not win ) £55K and your partner £30K.

Well spotted!' I definitely thought it was £170k combined income.

If total taxable income of the higher earner is sub £60k then pension contributions will be extremely tax efficient in avoiding HICBC and higher rate tax.

But my pension contribution are being paid of from my NET income, it's that still okay to go ahead with ?

Is the 55k income after your pension contributions are taken off?

I've got £55k/per year Gross income

2oxb1ulm2ke6

Strummer22 said:

2oxb1ulm2ke6 said:

Dazed_and_C0nfused said:

Albermarle said:

Myself and my partner we are both have a £85k income this year

I think there is a misunderstanding by some posters ( including me ) . We read this as that you are both earning £85K ( so £170K in total) .

However later posts show that you earn ( not win ) £55K and your partner £30K.

Well spotted!' I definitely thought it was £170k combined income.

If total taxable income of the higher earner is sub £60k then pension contributions will be extremely tax efficient in avoiding HICBC and higher rate tax.

But my pension contribution are being paid of from my NET income, it's that still okay to go ahead with ?

Is the 55k income after your pension contributions are taken off?

That's £55k/per year BEFORE TAX for myself and £35K/per year BEFORE TAX for my partner

Strummer22

2oxb1ulm2ke6 said:

Strummer22 said:

2oxb1ulm2ke6 said:

Dazed_and_C0nfused said:

Albermarle said:

Myself and my partner we are both have a £85k income this year

I think there is a misunderstanding by some posters ( including me ) . We read this as that you are both earning £85K ( so £170K in total) .

However later posts show that you earn ( not win ) £55K and your partner £30K.

Well spotted!' I definitely thought it was £170k combined income.

If total taxable income of the higher earner is sub £60k then pension contributions will be extremely tax efficient in avoiding HICBC and higher rate tax.

But my pension contribution are being paid of from my NET income, it's that still okay to go ahead with ?

Is the 55k income after your pension contributions are taken off?

That's £55k/per year BEFORE TAX for myself and £35K/per year BEFORE TAX for my partner

Can you ask your employer to increase your pension contributions such that what is left after your pension is taken off is £50,000*? Then you won't be liable for high income child benefit charge or higher rate tax. 

*technically £50,099 to avoid HICBC

Dazed_and_C0nfused

2oxb1ulm2ke6 said:

Dazed_and_C0nfused said:

Albermarle said:

Myself and my partner we are both have a £85k income this year

I think there is a misunderstanding by some posters ( including me ) . We read this as that you are both earning £85K ( so £170K in total) .

However later posts show that you earn ( not win ) £55K and your partner £30K.

Well spotted!' I definitely thought it was £170k combined income.

If total taxable income of the higher earner is sub £60k then pension contributions will be extremely tax efficient in avoiding HICBC and higher rate tax.

But my pension contribution are being paid of from my NET income, it's that still okay to go ahead with ?

Do you mean they are relief at source (RAS) contributions?

This is where you pay say £300 and the pension company £75 in basic rate tax relief.

These contributions don't reduce your taxable income but they do have, for you, two specific benefits on top of the £75 pension tax relief.

1.  They reduce your adjusted net income, which is what HICBC is based on.  So total  taxable income of say £56,000 and (gross) RAS contributions of £6,000 means adjusted net income of £50,000 and no HICBC to pay.

2.  The gross contribution increases your basic rate tax band meaning more of your income can be taxed at 20% and less at 40%.  A potential personal tax saving of several hundred pounds in your situation.  

Strummer22

Dazed_and_C0nfused said:

2oxb1ulm2ke6 said:

Dazed_and_C0nfused said:

Albermarle said:

Myself and my partner we are both have a £85k income this year

I think there is a misunderstanding by some posters ( including me ) . We read this as that you are both earning £85K ( so £170K in total) .

However later posts show that you earn ( not win ) £55K and your partner £30K.

Well spotted!' I definitely thought it was £170k combined income.

If total taxable income of the higher earner is sub £60k then pension contributions will be extremely tax efficient in avoiding HICBC and higher rate tax.

But my pension contribution are being paid of from my NET income, it's that still okay to go ahead with ?

Do you mean they are relief at source (RAS) contributions?

Well it sounds to me like OP has a net pay arrangement... but the terminology is ridiculously confusing and took me a while to get my head around.

Relief at source = pension provider gives you basic rate tax relief. But in my mind the "source" is my pay packet - no relief given there under RAS!