Pensions, tax and child benefit

[Steve vRS]

Ok, this morning I filled in my first ever tax return as I am one of those who must now complete one as my income falls into the band where some of the child benefit has to be repaid as I earn over £50k.

So, I am left with a £700 tax bill which is surprising as my tax affairs are straight forward. I have one source of income and pay tax off my earnings, PAYE.

So to make sure I've inputted the right numbers I have the following questions that I hope the PH font of knowledge can help with.

1. I pay into a defined contributions pension scheme. Is this contribution taken off my salary at source meaning i don't pay tax on it or do I pay 20% tax on the amount paid, but not 40%?

2. Should the income that the child benefit claw back is based upon be your total earnings minus any salary sacrifice (child care vouchers) minus pension contributions? I was under the impression that one should maximise pension contributions as this is taken into account when determining the amount of child benefit you receive or must pay back.

Thanks in advance all.

Steve

[LC23]

1. DC pension schemes - your contributions should already be deducted from your pay prior to PAYE being operated. Check your P60 - is the gross taxable income net of your pension contributions?

2. http://www.hmrc.gov.uk/childbenefitcharge/

[Steve vRS]

Bugger.

I think I have put the wrong figure in the pay from employment field. I have entered my total Gross pay without taking off my pension payments.

I have submitted my return but have not paid the bill yet.

Is it possible to correct this?

Steve

[Amateurish]

Did you not use your P60 for the figures? That will have the correct amount.

Since you're a higher rate tax payer, you should be able to claim back the difference between the basic rate and the higher rate of tax paid on your own pension contributions.

[Steve vRS]

Amateurish said:

Did you not use your P60 for the figures? That will have the correct amount.

Yes. It had a figure at the top of the form saying Gross pay with a further figure at the bottom saying This employment pay with eh amount of tax deducted along side.

I think it is this latter figure I should have used.

Amateurish said:

Since you're a higher rate taxpayer, you should be able to claim back the difference between the basic rate and the higher rate of tax paid on your own pension contributions.

On the calculation sheet issued by HMRC, it does have a line saying:- Your basic rate limit has been increased by £X to £Y for pension payments etc. This reduces the amount of income charged to higher rates of tax.

Like I said, first time having to do this and I am being a case study in how not to!

Steve

[Amateurish]

Steve vRS said:

Amateurish said:

Did you not use your P60 for the figures? That will have the correct amount.

Yes. It had a figure at the top of the form saying Gross pay with a further figure at the bottom saying This employment pay with eh amount of tax deducted along side.

I think it is this latter figure I should have used.

Amateurish said:

Since you're a higher rate taxpayer, you should be able to claim back the difference between the basic rate and the higher rate of tax paid on your own pension contributions.

On the calculation sheet issued by HMRC, it does have a line saying:- Your basic rate limit has been increased by £X to £Y for pension payments etc. This reduces the amount of income charged to higher rates of tax.

Like I said, first time having to do this and I am being a case study in how not to!

Steve

Did you have more than one employer in the tax year?

You should be able to claim higher rate tax relief on the pension contributions - you add in your gross contributions to your return.

[Steve vRS]

No, one employer.

Yo compound my stupidity, the lower figure described as 'Pay and Income Tax details' has an asterisk beside it which a footnote states, 'The figures marked * should be used for your tax return'. SO I've told HMRC I am earning more than I am hence the tax bill.

DOHH

Steve

[Amateurish]

http://www.hmrc.gov.uk/sa/correct-repay.htm

[LC23]

You firstly need to work out whether the contributions have already been deducted from your gross pay before PAYE has been calculated. If this has been done then you have no further relief to claim and your pension contributions should not be shown separately on your Tax Return.

Is your scheme an "old school" employer DC scheme with gross contribution status or is it actually Stakeholder or Group Personal Pension arrangement?

[Eric Mc]

So many people THINK their tax affairs are straightforward when then really aren't.

Sadly, the TAX SYSTEM is complex so even relatively uncomplicated factors create complicated tax calculation outcomes.