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Child Benefit Query-just under threshold.

(39 Posts)
Rascalls3 Mon 12-Nov-12 21:09:19

My salary varies from month to month-I am cabin crew. My last P60 shows a gross salary just under £49k,but I may end up earning a bit more this year.
Can I just ignore the recent letter as I am under the £50k for the time being and reassess it depending on whether or not my P60 in April 2013 shows a salary over £50k?
I REALLY want avoid (if at all possible) filling in Self assessment tax returns each year-my idea of a complete nightmare! I have always been PAYE and not had to worry about tax etc
I would really appreciate any advice.Considered ringing the helpline, but worried they will just put me down for self assessment. I have 16 year old twins, so will only be getting child benefit until 2014. Assume the tax returns would continue after that once started!!

MrAnchovy Wed 14-Nov-12 16:58:24

ihategeorgeosborne I'm not sure if you have done your sums right - if you are paying £6,000 into a pension scheme you are only saving clawback of 60% of your CB. There really ought to be an online calculator for this - the HMRC is OK as far as it goes but it doesn't show the total impact of changes to net salary.

ihategeorgeosborne Wed 14-Nov-12 18:01:06

MrAnchovy, As I understood it, if your net adjusted income is 56k and you pay 6k into a pension, does that not bring your net adjusted income down to 50k or have I mis-understood this?

MrAnchovy Thu 15-Nov-12 10:49:38

Yes it does, but if you ANI is £56,000 you will only lose 6000/10000 = 60% of your CB. So if you are getting £2,440 in CB you would only lose £1,470 or £122 a month.

Paying £6,000 in pension contributions will reduce your tax bill by £6,000 x 40% = £2,400* plus if they are paid under a salary sacrifice arrangement £6,000 x 2% = £120 NI. So your net income will reduce by £290-£300 a month.

Overall then your income will reduce by about £170-180 a month, although your pension contributions will increase by £500 a month - that's still quite a good deal.

All this is based on the assumption that you have 3 eligible children: if you have 5 eligible children your total child benefit is £3,843 so 60% of this is £2,306 or £192 a month. In this case your net income would indeed reduce by about £100 a month.

.

* note that if your pension contributions are taken from your net salary and your pension provider reclaims basic rate tax you need to increase your contributions by only £4,800; this will be treated as £6,000 gross, your pension provider will reclaim £1,200 direct from HMRC and you reclaim the remaining £1,200 through your self assessment return.

Houseworkprocrastinator Thu 15-Nov-12 11:08:30

do they take the pension money out before they work out net salary? so for example if you earn £52,000 but paid £3,000 into pension do you loose any child benefit?

JackThePumpkinKing Thu 15-Nov-12 11:09:19

This is a really useful thread, thank you.

manitz Thu 15-Nov-12 16:12:43

hi we've just had the letter too. DH earns 49k but sometimes gets a bonus which is a few thousand (3 maybe depending on year.) So we will need to lose some cb. From this thread it looks like he could pay a bit more into a pension and wont lose that part of cb. I thought the 50k was gross though not net?

crochetcircle Thu 15-Nov-12 18:22:37

Does anyone know if childcare vouchers count towards net income for child benefit purposes? We have a non contributory scheme at work.

TIA

MrAnchovy Thu 15-Nov-12 19:40:25

Pension contributions reduce the relevant income for Child Benefit.

Childcare vouchers up to the allowable limits do not increase the relevant income for Child Benefit.

It is your total income before tax that counts, not after tax, but confusingly HMRC call this "Adjusted Net Income" (because it is net of things like pension contributions).

Note that there are always exceptions, use common sense to see if the above may not apply (e.g. if your pension pot is already pver £1.5 million).

HMRC's chapter and verse on this here.

crochetcircle Thu 15-Nov-12 19:41:45

Thanks mranchovy very helpful

manitz Thu 15-Nov-12 20:39:07

thanks mr anchovy. i've since had a go on their calculator but it looks like the 13/14 tax year one doesn't work. It looks as though we'll lose about £40 but I can't work out if that will be the same the following year as it only applies for 13 weeks in 12/13. Will have a little play with figures and try and find a payslip...

ihategeorgeosborne Fri 16-Nov-12 22:08:56

Thanks for all your help with this MrAnchovy. From your figures, our overall income will reduce by just under £200 a month if Dh pays an extra £500 a month into his pension. However, if we don't pay extra contributions, our income will reduce by £120 a month from loss of CB. So for the extra £50 - £60 a month we will lose in net income, we will gain from enhanced pension contributions and from keeping our CB. As you say, it doesn't seem like a bad deal. Knowing our luck they'll abolish higher rate tax relief on pension contributions next!! Thanks again for all your help. smile

MrAnchovy Sat 17-Nov-12 00:25:33

...our overall income will reduce by just under £200 a month if Dh pays an extra £500 a month into his pension

I don't think that can be right; that implies a marginal rate of Tax and NI of 60% whereas it is actually 40% or 42%.

ihategeorgeosborne Sat 17-Nov-12 14:26:38

Ok, I will try and work this out one last time. I'll get there eventually! So, if your net pay is £3270 and you pay an extra £500 a month into your pension via your employer at source, i.e. before tax. This will leave you £300 a month worse off in your net pay, owing to the 40% tax relief you get on that £500. Therefore your net pay becomes £2970. Plus you keep £200 a month CB. Therefore net pay is £3170. If you choose not to pay into your pension, your net pay will remain at £3270 and you will only keep £80 a month in CB. Therefore your net pay will be £3350. As far as I can see, making an extra £500 a month in pension contributions will cost you an extra £180 a month in net pay. Please tell me I've finally got this right? TIA

MrAnchovy Sun 18-Nov-12 22:33:33

Yes that's it grin

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