Working out Adjusted Net Income
Discussion
Hello finance forum.
We have been bitten in the arse with the High Income Child Benefit Tax Charge, to the tune of nearly 6k.
It's my wife that's gone over the threshold for it and we were aware it needed to be paid back but, being honest, have put it off for longer than we should have.
Where we're confused is working out the adjusted net income. She is a teacher for a local authority and we assumed that we deducted the pension payment and payment for professional fees to come up with the figure they use to calculate what you have to pay back. HMRC have not deducted the pension however, thus leaving us liable to pay back a s
tload more than we thought.
I am looking for a local recommendation to get an hours sit down with a good accountant (anyone in Leeds want to get in touch?) otherwise anyone got any pearls of wisdom.
"Tax doesn't have to be taxing" apparently, when your PAYE and have skills that do not relate in any way to tax affairs this exact opposite is in fact true! It's a bloody minefield.
We have been bitten in the arse with the High Income Child Benefit Tax Charge, to the tune of nearly 6k.
It's my wife that's gone over the threshold for it and we were aware it needed to be paid back but, being honest, have put it off for longer than we should have.
Where we're confused is working out the adjusted net income. She is a teacher for a local authority and we assumed that we deducted the pension payment and payment for professional fees to come up with the figure they use to calculate what you have to pay back. HMRC have not deducted the pension however, thus leaving us liable to pay back a s
tload more than we thought.I am looking for a local recommendation to get an hours sit down with a good accountant (anyone in Leeds want to get in touch?) otherwise anyone got any pearls of wisdom.
"Tax doesn't have to be taxing" apparently, when your PAYE and have skills that do not relate in any way to tax affairs this exact opposite is in fact true! It's a bloody minefield.
dave_s13 said:
Hello finance forum.
We have been bitten in the arse with the High Income Child Benefit Tax Charge, to the tune of nearly 6k.
It's my wife that's gone over the threshold for it and we were aware it needed to be paid back but, being honest, have put it off for longer than we should have.
Where we're confused is working out the adjusted net income. She is a teacher for a local authority and we assumed that we deducted the pension payment and payment for professional fees to come up with the figure they use to calculate what you have to pay back. HMRC have not deducted the pension however, thus leaving us liable to pay back a stload more than we thought.
I am looking for a local recommendation to get an hours sit down with a good accountant (anyone in Leeds want to get in touch?) otherwise anyone got any pearls of wisdom.
"Tax doesn't have to be taxing" apparently, when your PAYE and have skills that do not relate in any way to tax affairs this exact opposite is in fact true! It's a bloody minefield.
It's always been calculated on the gross income....never on net income after deductions......We have been bitten in the arse with the High Income Child Benefit Tax Charge, to the tune of nearly 6k.
It's my wife that's gone over the threshold for it and we were aware it needed to be paid back but, being honest, have put it off for longer than we should have.
Where we're confused is working out the adjusted net income. She is a teacher for a local authority and we assumed that we deducted the pension payment and payment for professional fees to come up with the figure they use to calculate what you have to pay back. HMRC have not deducted the pension however, thus leaving us liable to pay back a s
tload more than we thought.I am looking for a local recommendation to get an hours sit down with a good accountant (anyone in Leeds want to get in touch?) otherwise anyone got any pearls of wisdom.
"Tax doesn't have to be taxing" apparently, when your PAYE and have skills that do not relate in any way to tax affairs this exact opposite is in fact true! It's a bloody minefield.
Derek Chevalier said:
Do you mean you have to pay 60% of the child benefit as the tax charge - can't see why you would be landed with a £6k bill (unless you have a lot of children!!)?
2.5 yrs with 3 kids is nearly 6k.Just done some digging and my Mrs didn't even know exactly how much she earnt. A bit more than I thought, which tips us over the threshold. b
ks.If anyone on here is claiming it, make sure you're aware of the high income charge. It's a bit of a shocker when you weren't expecting it!!
Sarnie said:
dave_s13 said:
Where we're confused is working out the adjusted net income. She is a teacher for a local authority and we assumed that we deducted the pension payment and payment for professional fees to come up with the figure they use to calculate what you have to pay back. HMRC have not deducted the pension however, thus leaving us liable to pay back a stload more than we thought.
It's always been calculated on the gross income....never on net income after deductions......tload more than we thought.OP, it's far from unknown for HMRC to make basic errors like this so well worth challenging them. They can even be quite helpful if you get the right person on the phone.
dave_s13 said:
2.5 yrs with 3 kids is nearly 6k.
Just done some digging and my Mrs didn't even know exactly how much she earnt. A bit more than I thought, which tips us over the threshold. bks.
If anyone on here is claiming it, make sure you're aware of the high income charge. It's a bit of a shocker when you weren't expecting it!!
But you don’t have to pay back more than you receive, as far as I’m aware?Just done some digging and my Mrs didn't even know exactly how much she earnt. A bit more than I thought, which tips us over the threshold. b
ks.If anyone on here is claiming it, make sure you're aware of the high income charge. It's a bit of a shocker when you weren't expecting it!!
So it’s not really a net problem if that’s the case. If anything it’s worth it for the tiny trickle of interest you’ll get for having the money in your accounts until you pay it back
They do charge interest on the unpaid amounts from previous years and can apply a late payment charges too, they have waived that however.
It's not like the cash was sat there waiting to be paid back unfortunately. I've had to sell my car to free up some funds. That's tough st really, but I have ended up with a really cool new (to me) motor.
What is a bit confusing though is where they say "from every £1 of pension contribution take £1.25 from your net income". Doing it that way means they owe us £500, as a minimum.
Anyway, I've given my Mrs some clear questions to ask and see if we can get some clarity in where we stand. She is a genius at managing a high school but totally clueless about tax affairs, as am I to be honest. If I remain unconvinced that we are paying what we should pay then I'm going to look into getting some professional advice.
It's not like the cash was sat there waiting to be paid back unfortunately. I've had to sell my car to free up some funds. That's tough s
t really, but I have ended up with a really cool new (to me) motor.What is a bit confusing though is where they say "from every £1 of pension contribution take £1.25 from your net income". Doing it that way means they owe us £500, as a minimum.
Anyway, I've given my Mrs some clear questions to ask and see if we can get some clarity in where we stand. She is a genius at managing a high school but totally clueless about tax affairs, as am I to be honest. If I remain unconvinced that we are paying what we should pay then I'm going to look into getting some professional advice.
deckster said:
OP, it's far from unknown for HMRC to make basic errors like this so well worth challenging them. They can even be quite helpful if you get the right person on the phone.
Yep, good point.When I take her gross monthly pay X 12 then subtract the pension payments the end figure is near enough what's on the total for the year on her p60. This is the number HMRC used to calculate the high income child benefit charge.
However, if you multiply the pension payments by 1.25. It reduces the adjusted net income to a level we'd get a bit back, this is the point I want some clarity on.
If you havent already done so, You (she) need to do a self assessment tax return. Not sure about the outstanding amount but for each year going forwards the payments can be repaid by changing tax code after self assessment. Your employers need to be told to change tax code by hmrc but this only happens if you do a return.
Its not so much being hit with a bill but paying back something you shouldnt have had. (Which sounds a bit harsh, but the claw back was in the news at the time)
Similar thing happened when we lived abroad, i had forgotten to cancel it and when randomly checking UK bank account found 2 years if payments- just had to send cheque!
Its not so much being hit with a bill but paying back something you shouldnt have had. (Which sounds a bit harsh, but the claw back was in the news at the time)
Similar thing happened when we lived abroad, i had forgotten to cancel it and when randomly checking UK bank account found 2 years if payments- just had to send cheque!
Edited by sawman on Thursday 13th September 08:16
Cheers Sawman
I was aware re paying it back via tax code change but the HMRC bod just said nope, need it all back in one hit please.
It may be that we can arrange this for what is owed for the 17/18 tax year however, I've given my wife instructions to ask.
It's a right ball ache, she is so busy at work and it's hard to get a spare minute to sort this stuff out, and they shut at 5pm, which is handy. I could do it for her but then I have to actually be present at the time of the call so she can authorise me. Again, they shut at 5pm!
There's apparently a lot of people been caught out by this and not everyone has the money set to one side doing nothing, a lot of people spend it on things like food, and shoes, both of which kids have a prodigious appetite for. Proper ste last few weeks anyway. had to sell my merc, dog cost 2 grand and looks like she might croak it anyway.....grumble grumble grumble.....kids are getting nowt for christmas this year!!
I was aware re paying it back via tax code change but the HMRC bod just said nope, need it all back in one hit please.
It may be that we can arrange this for what is owed for the 17/18 tax year however, I've given my wife instructions to ask.
It's a right ball ache, she is so busy at work and it's hard to get a spare minute to sort this stuff out, and they shut at 5pm, which is handy. I could do it for her but then I have to actually be present at the time of the call so she can authorise me. Again, they shut at 5pm!
There's apparently a lot of people been caught out by this and not everyone has the money set to one side doing nothing, a lot of people spend it on things like food, and shoes, both of which kids have a prodigious appetite for. Proper s
te last few weeks anyway. had to sell my merc, dog cost 2 grand and looks like she might croak it anyway.....grumble grumble grumble.....kids are getting nowt for christmas this year!!I feel your pain, theres never a good time for a big bill.
If your wife is not likely to be taking a career break before the kids are off your hands you might as well cancel the child benefit. We have kept ours on as my wife hasnt worked since kids. Apparently it helps with covering gaps in NI (not sure exactly how or indeed if that is true!) every year i do a self assessment and hmrc have tax code changed to scratch it back. Obviously there is a limit to how much can come back to them that way.
Cant see why they cant take 17/18 through paye code change though (disclaimer - not a tax expert, just seem to pay lots of it....)
If your wife is not likely to be taking a career break before the kids are off your hands you might as well cancel the child benefit. We have kept ours on as my wife hasnt worked since kids. Apparently it helps with covering gaps in NI (not sure exactly how or indeed if that is true!) every year i do a self assessment and hmrc have tax code changed to scratch it back. Obviously there is a limit to how much can come back to them that way.
Cant see why they cant take 17/18 through paye code change though (disclaimer - not a tax expert, just seem to pay lots of it....)
Edited by sawman on Thursday 13th September 11:35
sawman said:
I feel your pain, theres never a good time for a big bill.
If your wife is not likely to be taking a career break before the kids are off your hands you might as well cancel the child benefit. We have kept ours on as my wife hasnt worked since kids. Apparently it helps with covering gaps in NI (not sure exactly how or indeed if that is true!) every year i do a self assessment and hmrc have tax code changed to scratch it back. Obviously there is a limit to how much can come back to them that way.
Cant see why they cant take 17/18 through paye code change though (disclaimer - not a tax expert, just seem to pay lots of it....)
Lol....I would trust you to repair my dodgy plantar plate but I'll get an accountant if for the tax affairs If your wife is not likely to be taking a career break before the kids are off your hands you might as well cancel the child benefit. We have kept ours on as my wife hasnt worked since kids. Apparently it helps with covering gaps in NI (not sure exactly how or indeed if that is true!) every year i do a self assessment and hmrc have tax code changed to scratch it back. Obviously there is a limit to how much can come back to them that way.
Cant see why they cant take 17/18 through paye code change though (disclaimer - not a tax expert, just seem to pay lots of it....)
Edited by sawman on Thursday 13th September 11:35
I'm fortunate in many respects, one being that my Mrs is a bit of a high flier in her profession so I can coast along, to a degree anyway. Trouble is, this means she has no time, interest, or inclination to have anything to do with tax stuff. When you have been PAYE all your like it's an alien concept.
I know your'e a pod surgeon aren't you? I'm an MSK specialist pod myself <highfive>.
We'll get it sorted anyway. All the best to you.
dave_s13 said:
Lol....I would trust you to repair my dodgy plantar plate but I'll get an accountant if for the tax affairs
I'm fortunate in many respects, one being that my Mrs is a bit of a high flier in her profession so I can coast along, to a degree anyway. Trouble is, this means she has no time, interest, or inclination to have anything to do with tax stuff. When you have been PAYE all your like it's an alien concept.
I know your'e a pod surgeon aren't you? I'm an MSK specialist pod myself <highfive>.
We'll get it sorted anyway. All the best to you.
Guilty as chargedI'm fortunate in many respects, one being that my Mrs is a bit of a high flier in her profession so I can coast along, to a degree anyway. Trouble is, this means she has no time, interest, or inclination to have anything to do with tax stuff. When you have been PAYE all your like it's an alien concept.
I know your'e a pod surgeon aren't you? I'm an MSK specialist pod myself <highfive>.
We'll get it sorted anyway. All the best to you.
You will have to get some uber stickers in your party bus....
sawman said:
I feel your pain, theres never a good time for a big bill.
Apparently it helps with covering gaps in NI (not sure exactly how or indeed if that is true!)
the payment of child benefit gives the claiming party NI credits for State pension purposes - irrespective of whether or not the Child Benefit is partly / fully recovered by the high income wotsit. You need 35 years' contributions to get full State pension entitlementApparently it helps with covering gaps in NI (not sure exactly how or indeed if that is true!)
Edited by sawman on Thursday 13th September 11:35
oop north said:
the payment of child benefit gives the claiming party NI credits for State pension purposes - irrespective of whether or not the Child Benefit is partly / fully recovered by the high income wotsit. You need 35 years' contributions to get full State pension entitlement
Cheers - glad I didnt cancel it then - that should help keep us in curlywurlys in retirementdave_s13 said:
...
What is a bit confusing though is where they say "from every £1 of pension contribution take £1.25 from your net income". Doing it that way means they owe us £500, as a minimum......
So the HMRC robot told us this formula doesn't apply to a teachers pension contribution payment, couldn't explain to us why exactly. This nugget is taken from here btw.What is a bit confusing though is where they say "from every £1 of pension contribution take £1.25 from your net income". Doing it that way means they owe us £500, as a minimum......
https://www.gov.uk/guidance/adjusted-net-income
Can anyone on here confirm this is in fact the case??
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