Child Benefit

[OneManBanned]

My wife is currently pregnant with our fourth child.

My UK earnings are a modest £67k which nets me circa £3500 pcm after pension etc. I appreciate this is 'nothing' compared to the powerfully-built ;-)

We do not currently qualify for Child Benefit but if we did, it would, for 4 children, be worth some £3214 per annum. Would I be correct in assuming that if I were to increase my pension contributions to 26% (£17,420) I would reduce my take home pay to £3018 pcm, but would then qualify for £268 pcm in Child Benefit -which would leave me with a net monthly income of £3286, which is only £214 pcm less.

Is this right? It seems like a no-brainer if it is.

I do work in Financial Services, but not in payroll or personal finance.

Any help (especially from people that have done this) would be greatly greatly appreciated.

My company scheme credit tax at the basic rate, and then I claim the additional 20% through my self-assessment.

[untakenname]

Two child limit came in last month, surprised it didn't get more media attention tbh https://www.gov.uk/guidance/claiming-benefits-for-...

[OneManBanned]

Thanks. For some reason I thought that they'd decided not to go ahead with the cap for child benefit. I remember reading about it a good few years ago as one of my Catholic pals had six kids. He now has seven!

[onedsla]

Aside from the 2 child cap meaning you stay on benefit for 3 rather than 4, you are correct that increasing your pension contribution will mean you get to keep some / more / all of the CB.

[OneManBanned]

Thanks guys. I can't see anywhere where it says that Child Benefit will be limited. Tax credits etc (which we don't get) seem to be limited, but not child benefit.

[onedsla]

Have a play with https://www.gov.uk/child-benefit-tax-calculator
And a read of https://www.gov.uk/child-benefit-tax-charge/overvi...

Having re-read your post it seems that you are not currently registered for CB, which will limit you to CB claim to 2.

Last year I made a big lump sum payment from savings into a SIPP (opened in addition to employer's pension as I prefer to have more freedom with investment choice) which brought me back into CB territory. It turned a potential tax bill into a refund.

A few months later HMRC made an adjustment to my tax code which assumed that I'd be making the same payment into my SIPP every year, so my take-home went up. Sadly I could only make about half the additional SIPP payment. Having put my figures into the self assessment site this year, it looks like I'll owe a couple of thousand back. Suppose it was like an interest free loan which I can still defer to January.

So in summary, if you can afford to make significant pension contributions:
1) You get a bigger pension pot
2) You pay less tax
3) You get CB

So it is indeed a 'no-brainer' if you can afford it.
Note - pension contribution is not the only way to reduce your adjusted net income. Gift Aid & Child Care Vouchers have the same affect of reducing the figure.

[OneManBanned]

Thanks for that. Very useful. I still can't see anywhere that it says we'll be limited to two.

Having spoken with the wife she tells me that she is still claiming child benefit as the woman on the phone told her that it was the only way to maintain credit towards the state pension. I think that's wrong as my wife works (part time) and pays NI.

I now have to contact the revenue and have my self-assessment adjusted!

[Yuxi]

Wish I had known about this

I now have a £2800 bill for 15/16 and 16/17, must do a self assessment for 17/18 which will result in a £1700 bill, and if I dont put a load of money into my pension this year will get hit again.

Gutting as I have already paid 40% tax on the money I will use to pay the charge

[anonymous-user]

Yuxi said:

Wish I had known about this

I now have a £2800 bill for 15/16 and 16/17, must do a self assessment for 17/18 which will result in a £1700 bill, and if I dont put a load of money into my pension this year will get hit again.

Gutting as I have already paid 40% tax on the money I will use to pay the charge

Stupid is as stupid does?

It was hardly kept secret.

[keith333]

Yes, its an absolute no brainer to pay more into your pension as long as you have enough left over to pay the bills. I live in Scotland and higher rate of tax comes in at lower rate, so I pay even more in so that Nicola Sturgeon can go fk herself.

[Yuxi]

REALIST123 said:

Yuxi said:

Wish I had known about this

I now have a £2800 bill for 15/16 and 16/17, must do a self assessment for 17/18 which will result in a £1700 bill, and if I dont put a load of money into my pension this year will get hit again.

Gutting as I have already paid 40% tax on the money I will use to pay the charge

Stupid is as stupid does?

It was hardly kept secret.

Whatever.

I genuinely didn't know about it,I wasn't earning over 50k a year back in 2012, and for the last 6 years have spent most of the time working abroad. Asking around at work nobody had heard about it.

[StanleyT]

This charge is daft as it creates a gulf from £50k to £60k + (and for the extra responsibilities in grade where I work, really you'd want to be £75k plus to keep a work / life balance. At £50k you are still and overtime grade with a fixed base. At £60k you lose OT and are required to work where the company requires you in the UK or NW EU.

So when I looked at this being just above £60k, seeing (2kids) £2k back to the taxman for the child benefit, £4k back to the Taxman for 40% Tax anyway, 13% NI, 8% pension (I give back 9 of the 10k earned from 50 - 60k), I thought, fk it, I'm going to go £48k for four day weeks instead of £60k for five days.

So der Gubberment hasn't any more tax out of it, I've a better work life balance and UK productivity is going down....

The one thing my accountant does say is make sure you use the deferral option on your tax return, i.e. take the CB money anyway and then pay it back in the next years TAx Return, might as well have a free loan from the HMRC of £2k+ per annum.