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!

It doesn't cost you more, it costs you less because you get to keep both the child benefit and the money that you've paid into your pension belongs to you still.

@hadenoughofthisall it doesn't cost anything. it means pushing some of your current disposable income into being enjoyed in a couple of decades time when you need it, rather than now. it's probably more hassle than it's worth for someone on £80k or £90k but if your salary is just over the threshold like the OP it is definitely worth doing.

I find the net / gross pay terminology really unhelpful with pensions. NEST take deductions from your net pay - and the tax relief is then claimed by them from the government. You can deduct the grossed up contribution from your taxable pay for child benefit purpose - as someone described above - the amount needing to come off your net pay is less that £2100 due to the gross up. But whether you can make additional payments will be determined by your employer not by NEST as it is them who has to do the admin and they may not allow you to vary your contributions to keep things easy for them.

Ok.

All pension contributions are tax deductible. If you don't pay tax on them BUT you will pay national insurance on the pay if liable.

Your pension contributions from your salary are deducted therefore any tax so will show on your salary as gross contributions. Your employer will then tax you in the remaining for HMRC

If you can increase your pension contributions at source from your salary then just request that is done to your employer and pension provider. So if you earn £55k then ask that £5k divided by 12 is deducted each month.

If you have to make separate cash top up payments then you will pay them net if tax. What this means is that for every top up payment of £1k you make, you actually pay £800 and the remaining £200 is tax relief reclaimed by the pension provider.

What you also need to take account of is any gift aid payments you make. If so you can add them in to the £50k but come back to me if you need help,on that

Oh..HMRC may tell you you don't need to do a self assessment but my advice is to do so. Without boring you, if the make an error they are brilliant at blaming the tax payer. If you have done a self assessment they are stuffed as it acts as a declaration. They will hate you doing it and try to persuade you not to but I strongly advise you do. Takes 30 mins

But whether you can make additional payments will be determined by your employer not by NEST

You can log into your own NEST account and make one off payments using a debit card, your employer doesn't have to have any part in it.

The other reason for doing a tax return if you make pension contributions and earn more than £50k is to get higher rate tax relief

@qforcucumber is correct - nest does allow individual contributions that makes life easier. OP would need to do a tax return most probably in that case

@RicStar they also have the option to print out an annual statement showing employer and employee contributions, manual contributions and also tax relief claimed - makes doing the tax return much easier. In that sense they're quite useful, I have to deal with them on a daily basis for a number of clients and their website is easy to use for both employers and employees, most people just don't actually register to see what it can do.

How much do you pay into your pension currently? Be careful you don't push yourself over the Annual Allowance as then you'll get a tax bill for that.

@cocomelon23

The OP is no where near her annual allowance which is £40k. She is looking at £5k max

For others suggesting she just give up the child benefit...why when she can basically contribute £5k a year to her pension with the actual cost being £2K

Blame Osborne for bringing in such a crazy system

There is no pension currently hence why I’m happy to shift ‘extra’ cash that way now, and child benefit is basically free money I don’t want to give it up! Thanks all so much I have a much better understanding of it now. It’s a real minefield!

@MarieG10 I will do a SA thanks for the advice

None of us knew how much she was putting in to a pension. I don't recall her saying that she is only paying in this £5k. I was just pointing out that annual Allowance could be an issue if she was paying into other pensions

@cocomelon23 I think pp just meant that as op earns 55k gross shes more than likely nowhere near paying 40k limit into a pension pot.

@ slithytove have you used the calculator on the .gov website? If not maybe have a go as it may be actually be that much to pay in tax if you’re not much over the threshold, rather than paying additional pension contributions.

HMRC are good if you need to call them, think that would be a good place for you to start.

I did say in my op I don’t Currently pay in to a pension

Which calculator @Daphine2004

@slithytove it’s here:

www.gov.uk/child-benefit-tax-calculator

I had to do this recently for the first time. I didn’t want to pay more contributions into my pension at the moment. If you decide to pay the tax rather than paying into a pension you’ll need to register for self assessment straight away (Jan deadline for returns) and activate your account - they send you a code to do this. The online form looks pretty straight forward too, but I was surprised when they said my return for the previous year was late, so I’m hoping there aren’t any charges for that.

Good luck with whatever you decide to do.

Presumably my deadline isn’t this January as my year end isn’t until April?

January is the self assessment deadline (online submissions ) for the previous tax year, so 2018'19. Therefore your next text tear will end 5 April and self assessment due Jan 2021

I would suggest thought you do by August and be done with it