Child benefit tax - impact of pension contributions
Discussion
Hi all
Like a few people, I've had a letter about being charged child benefit tax which I had no idea about.
A couple of years ago I ramped up my employer pension contributions. The HMRC person I spoke to said that's irrelevant as that's nothing to do with this but I've read elsewhere that it could impact what I pay in child benefit tax.
Anyone got any idea about this?
Like a few people, I've had a letter about being charged child benefit tax which I had no idea about.
A couple of years ago I ramped up my employer pension contributions. The HMRC person I spoke to said that's irrelevant as that's nothing to do with this but I've read elsewhere that it could impact what I pay in child benefit tax.
Anyone got any idea about this?
The Leaper said:
If you ramped up out of regular income as in PAYE then HMRC are right. What you should have done is arrange the ramping up via a salary sacrifice agreement with your employer.
R.
I hate to say 'are you sure' to someone whose previous posts show they know what they are on about but.... are you sure?R.
My plan for this year was to put £8k from savings into one of my private pensions (from previous employment) with the 20% government bit topping it up.
My expectation was I would then get a tax rebate (via SA which I have to do anyway) of 20% of the £8k and regain the CB as well.
If my thinking is wrong, is it possible to make a one off payment into my employers pension (which is SS) and have that qualify
The law says that you have to repay some or all of the Child Benefit if you or your partner has a taxable Income exceeding £50,000. The key is knowing what constitutes "taxable income".
For a person in employment,. taxable income is your Gross Salary, including Bonuses, but less any pension contributions.
So, if you had Gross Salary of £55,000 but made pension contributions in the year of £6,000, your adjusted taxable income is now £49,000. And as a result, the Child Benefit Charge will not be applicable.
Donations to charity also help bring down your assessable income.
For a person in employment,. taxable income is your Gross Salary, including Bonuses, but less any pension contributions.
So, if you had Gross Salary of £55,000 but made pension contributions in the year of £6,000, your adjusted taxable income is now £49,000. And as a result, the Child Benefit Charge will not be applicable.
Donations to charity also help bring down your assessable income.
It doesn't matter whether it is salary sacrifice, and empolyer contribution or a personal contribution, the all have the same effect of reducing your income (adjusted net income after contributions).
If your contribution reduces your income to below £50k then there is no child benefit tax to pay. If it reduces it to below £60k then you have a reduced level of child benefit tax to pay.
Eric is spot on as always!
If your contribution reduces your income to below £50k then there is no child benefit tax to pay. If it reduces it to below £60k then you have a reduced level of child benefit tax to pay.
Eric is spot on as always!
mfmman said:
I hate to say 'are you sure' to someone whose previous posts show they know what they are on about but.... are you sure?
My plan for this year was to put £8k from savings into one of my private pensions (from previous employment) with the 20% government bit topping it up.
My expectation was I would then get a tax rebate (via SA which I have to do anyway) of 20% of the £8k and regain the CB as well.
If my thinking is wrong, is it possible to make a one off payment into my employers pension (which is SS) and have that qualify
I'm not a tax nor a CB expert. My plan for this year was to put £8k from savings into one of my private pensions (from previous employment) with the 20% government bit topping it up.
My expectation was I would then get a tax rebate (via SA which I have to do anyway) of 20% of the £8k and regain the CB as well.
If my thinking is wrong, is it possible to make a one off payment into my employers pension (which is SS) and have that qualify
My understanding is that the taxable income threshold before any reduction in CB is where you or your partner earns an income in excess of £50,000. So if you plan to use £8000 from savings as a pension contribution this will not reduce your income in any way ( unless the income on the £8000 once paid into the pension plan reduces your total income below the threshold).
R.
The Leaper said:
mfmman said:
I hate to say 'are you sure' to someone whose previous posts show they know what they are on about but.... are you sure?
My plan for this year was to put £8k from savings into one of my private pensions (from previous employment) with the 20% government bit topping it up.
My expectation was I would then get a tax rebate (via SA which I have to do anyway) of 20% of the £8k and regain the CB as well.
If my thinking is wrong, is it possible to make a one off payment into my employers pension (which is SS) and have that qualify
I'm not a tax nor a CB expert. My plan for this year was to put £8k from savings into one of my private pensions (from previous employment) with the 20% government bit topping it up.
My expectation was I would then get a tax rebate (via SA which I have to do anyway) of 20% of the £8k and regain the CB as well.
If my thinking is wrong, is it possible to make a one off payment into my employers pension (which is SS) and have that qualify
My understanding is that the taxable income threshold before any reduction in CB is where you or your partner earns an income in excess of £50,000. So if you plan to use £8000 from savings as a pension contribution this will not reduce your income in any way ( unless the income on the £8000 once paid into the pension plan reduces your total income below the threshold).
R.
The effect of any pension contribution reduces your income in that financial year by the gross amount of the contribution. It doesn't matter whether it is from earnings or savings, just the fact you made the payment.
I suspect what you are saying is that you will forego 8k in income ( and pay this into a pension ) and in place of this live off 8k in savings?
You are right to do whatever it takes to reduce your income to <50k. I have four kids, the income tax charge is over 3k. If I earn 100 quid I have to pay something in the region of 73 in tax.
You are right to do whatever it takes to reduce your income to <50k. I have four kids, the income tax charge is over 3k. If I earn 100 quid I have to pay something in the region of 73 in tax.
Spunagain said:
So, if you have not claimed CB for a few years but we’re entitled to it, can you claim it retrospectively?
To reply to my own question I have found out you can apply on line through the HMRC portal for this tax year and the previous 2 tax years.Thanks to Julian and Eric Mrs Spunagain am claiming back over £5000 in back dated Child benefits. Pistonheads pays dividends again!
This whole CB income limit seems to be have been made deliberately obscure!
Cheers!
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