Child benefit / adjusted net income
Discussion
I've never needed to think about this/ ever had to do any sort of self assessment so can anyone check my understanding?
For 'adjusted net income' between £50k & £60k you have to pay back some child benefit.
My monthly payslip has a "total taxable pay" line, which is:
+ monthly pay & overtime,
- monthly pension contribution, - company SIP (Share Incentive Plan) I make.
I estimate this total taxable pay will come to around £54k by April, so if between now & March I request via work to make voluntary additional pension contributions of £4k total, will this mean I have no issues/no need for a self assessment? & additional bonus of avoiding some 40% income tax?
The only other income I had in the year was for sale of some SIP shares, but they had been held for 5+ years so not subject to income tax, so I don't think this forms part of the Adjusted Net Income.
For 'adjusted net income' between £50k & £60k you have to pay back some child benefit.
My monthly payslip has a "total taxable pay" line, which is:
+ monthly pay & overtime,
- monthly pension contribution, - company SIP (Share Incentive Plan) I make.
I estimate this total taxable pay will come to around £54k by April, so if between now & March I request via work to make voluntary additional pension contributions of £4k total, will this mean I have no issues/no need for a self assessment? & additional bonus of avoiding some 40% income tax?
The only other income I had in the year was for sale of some SIP shares, but they had been held for 5+ years so not subject to income tax, so I don't think this forms part of the Adjusted Net Income.
Been asked a few times on PH already. The problem is "What do they mean by Adjusted Net Income".
There are many different versions of what "net income" actually means so it can be very confusing. For the sake of the Child Benefit system, "Adjusted Net Income " is actually -
Your GROSS Salary (after any payroll sacrifice type deductions) as stated on your P60 LESS any pension contributions made by you out of your "taxable net salary" and any payments made by you to charity under Gift Aid or by a Deed of Covenant.
So the figures might look like this -
Contracted Gross Salary - £70,000
Pension paid under Salary Sacrifice Scheme - £10,000
Gross Salary used for tax and NI purposes - £60,000.
Pension contributions paid by you out of your net salary (say) £7,000
Payments made by you to charities - £5,000
The figures used to decide whether you need to pay back any Child Benefit are -
Adjusted Gross Salary - £60,000.00
Less voluntary pension payments - £7,000
Charity payments - £5,000
Adjusted Child Benefit Salary - £48,000 (£60,000 less £7,000 les £5,000).
There are many different versions of what "net income" actually means so it can be very confusing. For the sake of the Child Benefit system, "Adjusted Net Income " is actually -
Your GROSS Salary (after any payroll sacrifice type deductions) as stated on your P60 LESS any pension contributions made by you out of your "taxable net salary" and any payments made by you to charity under Gift Aid or by a Deed of Covenant.
So the figures might look like this -
Contracted Gross Salary - £70,000
Pension paid under Salary Sacrifice Scheme - £10,000
Gross Salary used for tax and NI purposes - £60,000.
Pension contributions paid by you out of your net salary (say) £7,000
Payments made by you to charities - £5,000
The figures used to decide whether you need to pay back any Child Benefit are -
Adjusted Gross Salary - £60,000.00
Less voluntary pension payments - £7,000
Charity payments - £5,000
Adjusted Child Benefit Salary - £48,000 (£60,000 less £7,000 les £5,000).
I submitted my first tax return doing this on Monday, interestingly it doesn't ask for your pension contributions.
It asks if your net adjusted salary is lower than £50,000.
I said yes.
Then it asks for your salary and tax values off your P60 then it worked out I owed them £3.60
There wasn't anywhere to enter pension contributions other than telling you to deduct them in the question for is your net adjusted salary lower than £50,000.
Not sure if they work it out based off the P60 numbers but I was expecting to be asked what my contributions where.
It asks if your net adjusted salary is lower than £50,000.
I said yes.
Then it asks for your salary and tax values off your P60 then it worked out I owed them £3.60
There wasn't anywhere to enter pension contributions other than telling you to deduct them in the question for is your net adjusted salary lower than £50,000.
Not sure if they work it out based off the P60 numbers but I was expecting to be asked what my contributions where.
DaveCWK said:
Sorry, i'm not super hot on the terminology - My SIP share purchases are listed under Deductions on my payslip, alongside Tax & NI, so would they count towards reducing my adjusted net income?
You can work out whether the deductions have been made BEFORE the tax and NI was calculated or AFTER.If you find this difficult, whoever runs the payroll for your employer should be able to tell you.
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