pensions and child benefit

LoisnotLane

To be upfront - I lack knowledge in this area but am wanting to learn! I just find it all confusing! 

I am a working parent - I have 2 kids (2 and 4yo) and work a little over full time in 2 jobs - one in a university and one in the NHS. I have contributed to an NHS pension since 2009 and to a university one since 2022. 

My earnings are now:
NHS: £25,476                  pension: 7.7% = £1961
University: £32,652          pension: 9.8% = £3199.95
TOTAL= 58,128               
Total after pension paid = £52967.07

So I'm still over the £50k threshold. My questions are:
- Do NI contributions come off the total listed above (i.e. does 'adjusted net income' include NI or not)?
- Do I need to fill in a self assessment tax form if my salary is above the threshold, regardless of whether pension, gift aid and whatever else bring my salary down low enough to not pay?
- Should I contribute more to one of the pensions? I still don't really get how they work (i.e. I know some with some pensions, what you get out is linked to what you put in, but not for others). If I were to do this, would it be better in the NHS one (not even sure if that's possible) or the USS one (pretty sure that's possible)? 

I don't mind paying some of the child benefit back if that's needed, but I am likely to reduce my work at some point in the next couple of years and am keen to avoid the self-assessment hassle if I can. 

Thanks for any advice. 

Lois

daveyjp

If you suspect you are earning above the threshold you need to do a self assessment as this calculates the charge due.  If you are on PAYE its a simple process, most info will be on your P60. 

If you have been above the threshold for a few years there may be a back payment due.

If in future years if you fall back below the threshold HMRC will let you know and no self assessment will be necessary.

r6mile

National insurance payments - like your income tax - does not reduce your ANI.
Keep in mind that interest payments from savings, and dividends etc, do increase your ANI though (but gift aid payments reduce ANI).

But assuming you don't have those, and your ANI is approximately 53k, then yes you would need to either

1) submit a self-assessment once you have your P60 and pay the High Income Child Benefit Charge. Your HICBC would equal 30% of the child benefit received in that year. For 2 kids CB is £2075 so HICBC due would be £622.5.

2) Make additional pension payments of 3k. You don't have to submit a self-assessment. Keep in mind that you will receive 40% tax relief on those, so in net terms the 3k would only cost you 1.8k (minus the 600ish in HICBC saved, so really 3k in pension only costs you 1.2k).

Lots of ways to do this, but what I have done in my case is join the Civil Service Additional Voluntary Contribution scheme, which is a Defined Contribution pension, and arrange for monthly contributions so as to take me below the HICBC threshold. I believe the NHS has an AVC scheme, and USS also allows for additional contributions. I chose to do it this way because it gets taken out of my salary every month so easier to budget, and you don't have to tell HMRC for the tax rebate - they still haven't paid mine back this year over 2.5 months after asking for it. If you made contributions to a SIPP you would have to tell HMRC so it's a bit more of a pain.

LoisnotLane

Thanks so much for your speedy replies!

I was on maternity leave over most of last year, so don't think this issue applied then. I'll double check my P60s. 

Can I double check - if my gross income is above £50k, do I need to fill out a self-assessment form regardless of whether tax etc reduces my income to below £50k?

With regards to making additional pension payments, do you know whether I should do this into the NHS or USS pension (in terms of getting the most benefit for those payments)? 

Thank you 

r6mile

HICBC can only paid via a self-assessment, so if your ANI (basically your taxable income) is over 50k then you will have to submit one.

If your ANI is below 50k (because of additional pension contributions), then you won't have to submit a self-assessment form. If these pension contributions are taken gross from your pay (ie via NHS or USS pension), then you won't have to even tell HMRC. If your pension contributions are paid via your post-tax salary, then you will have to tell HMRC to also claim back the tax relief - you can do this I think even just by ringing them, or writing to them, but it may take them a while to process. Hence my suggestion that you arrange for Additional Voluntary Contributions. I am not sure whether the NHS or USS scheme would be better for these, assuming they are both Defined Contribution schemes then it will depend on the investments chosen within your pension.

Albermarle

With regards to making additional pension payments, do you know whether I should do this into the NHS or USS pension (in terms of getting the most benefit for those payments)? 

Firstly both these are Defined Benefit (DB) pensions. You gain pension based on the rules of the scheme, but in simple terms your pension will be based on how many years you have worked there and your salary. Your contributions are set by the scheme, but are an arbitrary figure and do not directly affect how much pension you will get.

Some schemes allow you to buy additional pension/years in the scheme, but each scheme has its own rules and some do not allow it or restrict it. Another poster will hopefully be able to give a clearer answer on the NHS and USS schemes. I think generally though the NHS scheme is better than the USS scheme.

The other type of pension is a Defined Contribution ( DC ) scheme. This is a kind of savings/investment account with some tax benefits. You build up a pot of money rather than a specific entitlement to a pension income. In general they are inferior to DB schemes but maybe your only option for making additional pension contributions. You can open one easily online, or as another poster suggested some DB schemes offer the option of a linked DC scheme, often referred to as an AVC scheme.

Doctor_Who

LoisnotLane said:

With regards to making additional pension payments, do you know whether I should do this into the NHS or USS pension (in terms of getting the most benefit for those payments)? 

Thank you 

I am a deferred USS member with benefits built up both before and after the 2016 changes. Prior to 2016 you could buy added years AVCs, which I did (these were allowed to continue after 2016). My understanding is that now with the hybrid DB/DC scheme (salary capped DB with contributions above the salary cap going to the DC pot) any additional payments you make are to your DC pot, i.e. as Albermarle says, the NHS scheme is probably better. More info on the USS website.

MX5huggy

If the primary aim
is just to slip under the HICBC i expect your income is variable to a degree so I would just use a SIPP open it now and the end of March you can make a payment to ensure you are under the limit. Using either scheme for additional contributions, fixed monthly amounts would seems an over complication to me. 

r6mile

Or you can do both - you can arrange AVCs to take you to the threshold, and open a SIPP and if for whatever reason you end up being above the threshold you can make a payment to the SIPP to take you back under. And sure you may have to chase HMRC for that refund but it will be a smaller amount.
At least this is what I'm planning to do, given how long it's taking me to get my £1.5k refund this year...

LoisnotLane

You are all so helpful, thank you! 
I'll take a look into the ease and benefits of making additional contributions into each pension (I think I can do a one-off payment into the USS one?) and figure it out from there.
Yes, the main aim is to stay below the HICBC (though I'm bugged by how this remains unchanged even with inflation as it is?!) but also to avoid the self assessment if possible - I did it a few times before and would rather keep it out of my life unless there is a real need to do it.

Doctor_Who

LoisnotLane said:

You are all so helpful, thank you! 
I'll take a look into the ease and benefits of making additional contributions into each pension (I think I can do a one-off payment into the USS one?) and figure it out from there.
Yes, the main aim is to stay below the HICBC (though I'm bugged by how this remains unchanged even with inflation as it is?!) but also to avoid the self assessment if possible - I did it a few times before and would rather keep it out of my life unless there is a real need to do it.

The USS website says the following (the Investment Builder is your DC pot):

How do I go about making additional voluntary contributions to the Investment Builder?

You can start making additional contributions to the Investment Builder through My USS. You can choose to make a one-off payment, or monthly contributions as a percentage of your salary.