Self employed basic to higher rate income tax

Dh6

Thank you for your patience, it looks as if I’ve been careless with my terminology as well as misunderstanding.

hypothetically scenario 1.

I make £58000 profit from self employment. 

I make £900 interest from savings accounts.
I pay £15000 into my pension net.

Wife is a basic rate tax payer who doesn’t always use up her personal allowance hence we utilise the marriage allowance. We also claim child benefit for our two children circa £170 every 4 weeks.

If the above scenario was the case would I/we remain eligible for child benefit?

Would I retain the £1000 personal savings allowance?

Would we still be able to use marriage allowance?


Many thanks DH

Dazed_and_C0nfused

You are always "eligible"' for Child Benefit, it's just sometimes some or all needs to be paid back as the High Income Child Benefit Charge.

Your figures are total taxable income of £58,900 and the gross pension contribution of £18,750 means you are nowhere near being a higher rate payer.

And even without the pension contributions there would be no HICBC due as your total taxable income is less than the new lower threshold of £60,000.

Dh6

Thanks very much for taking the time to explain dazed and confused 

Dh6

If I was to make £65000 in the above scenario rather than £58000 how would this then affect us?

Dazed_and_C0nfused

Dh6 said:

If I was to make £65000 in the above scenario rather than £58000 how would this then affect us?

You would still be ~£4k under the higher rate threshold.

And you adjusted net income would still be low enough to avoid HICBC.

Dh6

https://community.hmrc.gov.uk/customerforums/pt/a3713c29-ec95-ee11-a81c-000d3a0d1e21

Dh6

I’ve tried to digest the above information but what I’ve read on the HMRC website appears to me to contradict it. So confused!

Dazed_and_C0nfused

Dh6 said:

I’ve tried to digest the above information but what I’ve read on the HMRC website appears to me to contradict it. So confused!

What is it that you are confused about?

What do you think is contradictory?

Relief at source pension contributions, which is the method you would be using as someone who is self employed, do not reduce either your taxable profits or taxable income overall.

That is what the response from HMRC in the link you provided confirms   But you seem to be reading other things into it that simply aren't there.  

Relief at source pension contributions have a host of other possible benefits, not least the fact that whatever you pay (within the relevant limits) has 25% added by the pension company virtually straight away.  So say £6k from you becomes a pension fund of £7.5k.

Dh6

Sorry to come back to this.

The bit I’m struggling to understand is my relief at source pension contributions you say, do not reduce my taxable profits or income overall.

But if I was to make 65k profit in the above scenario you say my adjusted net income would still be below the HICBC threshold which is 60k this tax year?

DH

Marcon

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

See if either of these links helps to clarify any remaining confusion:

https://www.litrg.org.uk/tax-nic/income-tax/high-income-child-benefit-charge

https://www.turn2us.org.uk/get-support/information-for-your-situation/child-benefit/high-income-child-benefit-tax-charge