Paying into pension to keep child benefit advice

[slithytove]

Can anyone please help me with calculating pension contributions in order to keep child benefit?

Don’t currently pay in to a pension but will be auto enrolled next week.

2019-20
Income £53300 gross (salary plus bonus already received)
£3300 over the child benefit income so I assume I have to pay £3300 into a pension before April in order to avoid paying any CB back.
Does that equate to 3 months at £1100 each, or can I just make one additional voluntary payment on top of my minimum 5% contributions?

2020-21
Then going forward income £50000 gross plus potential bonus of £5000, so £5000 over the child benefit starting threshold. Would that then equate to pension payments of £416 a month, or would I continue paying pension payments based only on a percentage of basic salary? And if so, what would that be? Presumably 10% if I want to remain under the CB threshold?

Finally, if I get to under the threshold for CB repayment, do I still need to do a tax return?

Could anyone shed any light on this please? Thanks very much in advance if so, my head is completely foggy!

Doesn’t matter whether you pay in one go or not.
You mention a 5% pension contribution - do you need to deduct that as well? (so less needed to over pay)
Do you receive childcare vouchers? That also brings your net pay down.

I didn’t need to do a tax return.

The 5% contribution should start this month I haven’t done it before

I don’t receive vouchers

So on a NEST pension can I make one off top up payments?

Are my calculations right for bringing me to under the CB threshold

Bump, please can anyone help? I have found out that in terms of earnings I will be 2100 over the 50k threshold. So do I pay all of that into the pension to avoid needing to do a Tax return and pay back any CB?

Are you able to flex the amount you pay into your pension with your employer? If so, you don't need to file a tax return.

If you are making a separate contribution (e.g. into a SIPP), you will still need to file a tax return.

If you are £2,100 over the limit, you need to make a net pension contribution of £1,680 - this is grossed up via tax relief to £2,100 and will bring you back below the threshold

Yes it’s all going into the nest plan

Ok thanks that helps!

What about next financial year? Assume gross total pay of 55000? Do I just set my pension contributions at 10%?

Do also check how your company pays its own pension contributions for you.

I moved job when the kids were 3 and although my total package didn’t change much, the way my pension and net pay was calculated did (I don’t quite understand the nuts and bolts). I ended up having to pay back child benefit because my taxable pay had increased.

What I’m saying, is to check what you actual net pay is for the purposes of the High Income Child Benefit charge and then make the calculation for your additional pension contribution.

Your HR people will know.

NEST pension contributions are deducted from your NET pay, so wouldn't bring your gross salary down.

Oh you are kidding that’s frustrating!

Yes my Employer contributes the 3% minimum

Surely I would just do a tax return saying I have paid x amount of pension from my net pay which would then be used to recalculate gross pay?

A quick google says even if pension contributions are taken from net pay they still reduce taxable income - is that correct?

How long do I have to make the additional payment after receiving p60?

NEST pension contributions are deducted from your NET pay, so wouldn't bring your gross salary down.

Pretty sure that's incorrect. Pension contributions made from net pay still attract tax relief. The way in which you get tax relief is different than if you'd made them from gross salary, but that doesn't mean that you can't use it to reduce your adjusted net income.

I don't understand why you would lose your child benefit by earning over 50k? It just puts you into the higher earner bracket so you get taxed on the child benefit you receive... You do have to declare it and do self assessment every year though.
This is what me and my husband do.

@Diaryofalways87

That is 100% incorrect, the only difference being is that you do not gross up your contributions. You also pay less NI

You asked:

A quick google says even if pension contributions are taken from net pay they still reduce taxable income - is that correct?

It’s correct in general, but not necessarily for general pension contributions that are made before you are paid - it depends how your employer does them. The online guidance from HMRC isn’t that helpful. I’m afraid I don’t understand it well enough to explain more than that. Please ask HR or call the HMRC child benefit helpline (it’s part of self assessment).

It reduces your income, therefore is a tax reducer.

If you earn £50k and have £10k taken off your pay before being paid, it’s as if you have been paid £40k so you have 20% tax relief that way.

Alternatively, you have earn £50k and pay £8,000 into your pension, the pension provider then claims £2k from the government and you have your £10k in your pension.
The benefit means that your basic rate is extended by £10k. So you can earn £10k at 20% tax and not 40%

Same outcome, different routes

Oh dear I appreciate all your help but am still none the wiser. Ideally I don’t want to pay back CB and I don’t want the hassle of self assessment if it’s avoidable. I will try HMRC to see if they can help at all

When I get the welcome pack from NEST maybe they can illustrate it, if it’s off gross or net. Either way I have to pay a maximum of £2100 this financial year if I’ve earned gross £52100?

Ok I was speaking from a payroll perspective. I'm not a tax advisor so I'm not sure if there's some jiggery pokery you can do on a tax return. But to me, a post tax deduction does not reduce your gross pay.

Nest is from gross pay, usually at 5% (employer adds 3% ). Not sure if you can do top ups as I have not tried - my pension is nest and I administer the scheme here

@okiedokieme Nest operate on a net pay basis, you should be deducting 4% from an employees net pay, the remaining 1% is reclaimed by Nest as tax relief.

The tax relief method we use is relief at source (RAS), which means that we claim tax relief back from HM Revenue Customs (HMRC) on behalf of an eligible worker after contributions are paid to us. NEST calculates tax relief after tax and National Insurance.

If a worker is eligible for tax relief, the tax rate will be determined by where the worker lives. For example, Wales, England and N. Ireland or Scotland. You won’t be able to amend a worker’s tax regime as this will be based on the information provided to us by HMRC.

The basic rate of tax relief is 20 per cent. This means, for every £1 of a worker’s contribution we’ll claim 20p from the government.

If the worker’s contribution is 5 per cent and they’re eligible for tax relief then their actual contribution will be made up of:

4 per cent from their pay – this is what you send to us
1 per cent tax relief – this is what we claim from the government
So if a worker is eligible for tax relief the worker contribution level you set for them (5 per cent in this example) is higher than the amount you actually send (which is 4 per cent in this example).

Sorry if I'm being stupid but why the hassle, why not just pay back the child benefit or stop claiming it? This seems like such an unnecessary faff that will cost you more than the child benefit you'd receive?!

I am pretty sure NEST don't allow you to make additional top ups. I work for a small company and was involved with choosing the pension provider a couple of years ago and I seem to recall rejecting the NEST option precisely because I knew I would need to do exactly what you want to and the rules didn't allow it. NEST is designed to be extremely simple to administer so there is very little flexibility. this info is vaguely remembered from a number of years ago so may be incorrect.