Child Benefit Tax Charge
Discussion
Eric Mc said:
Never a truer word.
Abolish most tresholds but reduce tax and NI rates to compensate.
The same goes for VAT.
I don't know if that would be possible as isn't most tax is paid by a few high earners?Abolish most tresholds but reduce tax and NI rates to compensate.
The same goes for VAT.
Like when flat tax was looked at in Australia - it was only quite late in the process they realised that most people would be worse off and a few high earners would be massively better off.
Many people might be considering ‘taking’ a pay rise as a result of these changes and salary sacrificing less.
One small gotcha is the change in tax relief on childcare vouchers if you are deemed to be a higher rate tax payer when the employer does the calculation required for this.
One to have half an eye on if you are still in the childcare voucher scheme.
One small gotcha is the change in tax relief on childcare vouchers if you are deemed to be a higher rate tax payer when the employer does the calculation required for this.
One to have half an eye on if you are still in the childcare voucher scheme.
ChrisNic said:
Many people might be considering ‘taking’ a pay rise as a result of these changes and salary sacrificing less.
One small gotcha is the change in tax relief on childcare vouchers if you are deemed to be a higher rate tax payer when the employer does the calculation required for this.
One to have half an eye on if you are still in the childcare voucher scheme.
What's this then? I still use childcare vouchers, it is effectively salary sacrifice (as opposed to the 'tax free childcare' scheme) and I haven't heard about anything changing? One small gotcha is the change in tax relief on childcare vouchers if you are deemed to be a higher rate tax payer when the employer does the calculation required for this.
One to have half an eye on if you are still in the childcare voucher scheme.
ChrisNic said:
Many people might be considering ‘taking’ a pay rise as a result of these changes and salary sacrificing less.
This - if you were on £60k before and thus bringing your salary down to £50k to avoid paying the hicbc, you can now take the full £60k and still keep all the child benefit. That £10k will however cost you £4.2k (40% tax and 2% NI), so your left with £5.8k or around £480pm - not to be sniffed at OR still £10k into your pension (if you are enrolled in a salary sacrifice pension).I guess if you can survive on £50k and you need to increase your contributions its no brainer, but then £500 a month at a stretch might cover the payments on a weekend toy! decisions decisions.
Crumpet said:
So does this mean that, hypothetically, if you earned £120,000 and salary sacrificed 50% into your pension (to get the maximum £60k allowance) you could then claim the full child benefit amount?
What do the tax savings look like on that as a percentage? Assume two children, which would mean claiming approximately £2000. I’ve roughly calculated it as £30,200 so 50% extra cash going to you. Or am I wrong?
Going back a few years I salary sacrificed 85% of an £80k income into the work pension. I used pension allowance carry over and over 2 years my pension took an enormous boost (mostly paid for by the saved tax and NI).What do the tax savings look like on that as a percentage? Assume two children, which would mean claiming approximately £2000. I’ve roughly calculated it as £30,200 so 50% extra cash going to you. Or am I wrong?
Even better was getting £7k a year back from the government by tax credits as I was deemed to only be earning minimum wage.
Perhaps only for guidance on how to take advantage of salary sacrifice if you want to, and are able to through your employer, and wish to keep more of the child benefit and pay less tax and boost pension etc. But that's freely available on t'internet.
Self assessment is a doddle and HMRC will take it and tell you what chuld benefit you need to pay back as per the tapering to 80k (if we are talking about next year, that is).
Self assessment is a doddle and HMRC will take it and tell you what chuld benefit you need to pay back as per the tapering to 80k (if we are talking about next year, that is).
oyster said:
Going back a few years I salary sacrificed 85% of an £80k income into the work pension. I used pension allowance carry over and over 2 years my pension took an enormous boost (mostly paid for by the saved tax and NI).
Even better was getting £7k a year back from the government by tax credits as I was deemed to only be earning minimum wage.
Tell me more. I have just searched Tax Credit up and my mind is boggled.Even better was getting £7k a year back from the government by tax credits as I was deemed to only be earning minimum wage.
WhiskyDisco said:
oyster said:
Going back a few years I salary sacrificed 85% of an £80k income into the work pension. I used pension allowance carry over and over 2 years my pension took an enormous boost (mostly paid for by the saved tax and NI).
Even better was getting £7k a year back from the government by tax credits as I was deemed to only be earning minimum wage.
Tell me more. I have just searched Tax Credit up and my mind is boggled.Even better was getting £7k a year back from the government by tax credits as I was deemed to only be earning minimum wage.
Milner993 said:
Is it worth using an accountant to help with the self assessment process when earning around £65k to £70k a year?
Are there any tips and tricks that make paying a fee for their service advantageous?
I've never needed to start thinking about this process until this past year!
Personally, I'd say no, so DIY. Are there any tips and tricks that make paying a fee for their service advantageous?
I've never needed to start thinking about this process until this past year!
In my case I do have some detailed tax matters to deal with but, nevertheless, SA is a doddle if you have kept all the relevant paperwork, financial statements, documents etc together. I record everything relevant on an appropriate spreadsheet as and when things happen, so for me it's simply a matter mostly of inserting several totals into the SA form.
R.
I saw this video which got me thinking about how I might be able to reduce/avoid the charge for the current tax year, ahead of the changes in April.
https://www.youtube.com/watch?v=pE2V83OybUo
I've been doing some maths to see if I'd benefit from shifting cash from 'savings' into a pension. Some made up numbers: assume a taxable income of £55k for FY23-24, this would mean HRMC want 50% of the child benefit back, i.e. £624. However, if you made a personal pension contribution of £4k, this becomes £5k gross contribution, taking your taxable income down to £50k. Therefore saving the £624 child benefit because the charge no longer applies.
If I've done that right, you'd have gained £1624 by moving £4k into a pension - assuming you can afford to do so. Downside is that £4k is locked away. However it will still be earning - and in a tax free wrapper too (I know, ISAs).
Have I got that right?
https://www.youtube.com/watch?v=pE2V83OybUo
I've been doing some maths to see if I'd benefit from shifting cash from 'savings' into a pension. Some made up numbers: assume a taxable income of £55k for FY23-24, this would mean HRMC want 50% of the child benefit back, i.e. £624. However, if you made a personal pension contribution of £4k, this becomes £5k gross contribution, taking your taxable income down to £50k. Therefore saving the £624 child benefit because the charge no longer applies.
If I've done that right, you'd have gained £1624 by moving £4k into a pension - assuming you can afford to do so. Downside is that £4k is locked away. However it will still be earning - and in a tax free wrapper too (I know, ISAs).
Have I got that right?
Tom8 said:
Is it just me who is amazed that we are paying out benefits to people on such high incomes, combined or single? And then wonder why we can't afford anything?
If you appreciate how expensive:I. A family home
II. Childcare costs
III. Utility bills (I.e. heating and cleaning)
Have become in a relatively short period of time then a single-earning household on £50k isn't a huge amount. Now when it's two earners that's completely different, but nonetheless the system doesn't work that way, yet.
Tom8 said:
Is it just me who is amazed that we are paying out benefits to people on such high incomes, combined or single? And then wonder why we can't afford anything?
Probably just you.It isn't a "high income" if you live anywhere in the South East of England or London and have a massive mortgage or rent to pay, which is the case for many people in that high wages/high living costs trap.
A lot of people on £60k don't have a huge amount of disposable income once housing, bills and (the real kicker) childcare costs are taken out.
We've got a 9yo kid, amongst all the parents I know, the mums who carried on working have done it to keep their career going once the kids go to school. Pretty much all of their salary goes on nursery fees. They are by no means wealthy.
PurpleTurtle said:
amongst all the parents I know, the mums who carried on working have done it to keep their career going once the kids go to school. Pretty much all of their salary goes on nursery fees.
That was us back in the day, the wife is a teacher. Nursery fees for 1 were just over 1K per month and peaked at £1900 a month for a year or so while both kids were at nursery.I guess if you look at it long term, she will have had a full career, full NI contribs, and full pension contribs, so it probably works out in the end, but it sure is tight budgeting during the nursery years......
RenesisEvo said:
I saw this video which got me thinking about how I might be able to reduce/avoid the charge for the current tax year, ahead of the changes in April.
https://www.youtube.com/watch?v=pE2V83OybUo
I've been doing some maths to see if I'd benefit from shifting cash from 'savings' into a pension. Some made up numbers: assume a taxable income of £55k for FY23-24, this would mean HRMC want 50% of the child benefit back, i.e. £624. However, if you made a personal pension contribution of £4k, this becomes £5k gross contribution, taking your taxable income down to £50k. Therefore saving the £624 child benefit because the charge no longer applies.
If I've done that right, you'd have gained £1624 by moving £4k into a pension - assuming you can afford to do so. Downside is that £4k is locked away. However it will still be earning - and in a tax free wrapper too (I know, ISAs).
Have I got that right?
Its even better than that as its in the 40% tax brackethttps://www.youtube.com/watch?v=pE2V83OybUo
I've been doing some maths to see if I'd benefit from shifting cash from 'savings' into a pension. Some made up numbers: assume a taxable income of £55k for FY23-24, this would mean HRMC want 50% of the child benefit back, i.e. £624. However, if you made a personal pension contribution of £4k, this becomes £5k gross contribution, taking your taxable income down to £50k. Therefore saving the £624 child benefit because the charge no longer applies.
If I've done that right, you'd have gained £1624 by moving £4k into a pension - assuming you can afford to do so. Downside is that £4k is locked away. However it will still be earning - and in a tax free wrapper too (I know, ISAs).
Have I got that right?
Put a £4k lump sum in your pension and the provider should top that up to £5k. Then do a self assessment (you can write to the HMRC but I find they don't reply/look at your letter for a very long time) and the HMRC will refund you the other £1000 in tax you effectively overpaid (the second 20%.)
So that £5k in your pension has only cost you £3k and you don't have to pay back £624. (For me it would be over £1k I don't have to pay back as I have 2 kids. Definite no brainer)
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