Teachers- Child Benefit tax charge

[Icantaffordahugetaxbill]

I am beyond confused and would really appreciate some help. I have phoned child benefit who gave me conflicting information to when my friend called.

My salary from Sept is just over 50k. Previous to this I was on maternity so my taxable income for the year is around 30k.

When I phoned, the lady said I would have to pay the higher income tax charge.

My friend was told when she called she could deduct her pension contributions, which would leave her well under 50k. I was told it went on my “headline salary”. I asked if that meant “gross” and the lady told me it did.

I’ve no idea what “adjusted net income” means and everything I read is conflicting- some sites saying to deduct pension contributions, some not, some saying you can deduct union subscriptions, some not. The only consistent advice is to deduct gift aid donations. But deduct them from what, my 50k salary or my lower taxable income?!

I feel very dim trying to work this out!

If you are a teacher earning over 50k as in this is your gross salary, do you pay the tax charge?

That’s scary!!! Who do you ask then?!

You will only be liable from your first full tax year at the higher salary (unless you have other sources of income). Assuming you start new job in Sept 2021 it will be for April 2022-23 , due by end January 2024. However you would need to register for Self Assessment in advance, maybe this is the confusion. No harm doing so when you start the job and proving nothing additional to pay for 2021-22.

I think it's worthwhile reading the online guidance they provide and if that doesn't tally with what they tell you, then follow it up - as you've rightly done. We ended up getting an accountant to sort it out for us, which was expensive but worth it because of the sum involved. Of course they aren't liable for the cost of that

Its so frustrating isn't it - a few years ago, in a similar position, we called HMRC, got told one thing. Wasn't sure so followed it up in writing - set out all our details etc, enclosed all P60s, pension contributions, child benefit documents. Got a letter back from HMRC with a full tax calculation saying we didn't owe anything.

Fast forward 4 years or so - get a letter saying we owe the CB charge - sent HMRC their own letter saying we didn't owe anything. Apparently they were wrong, their letter wasn't correct and we owe £2k. Currently going through the complaints procedure, but no doubt we'll end up having to pay.

Its just a farce.

Just claim the cb and do a tax return at the end of the year. Hmrc will have your salary/tax information and you just add in gift aid etc. It will then tell you how much, if any, you were overpaid.

The advisor was wrong. Adjusted net income is what to use so that will include PAYE income, any interest received, dividends, benefits in kind (car, health insurance etc) less your (not employer) pension contributions and any other allowable expenses such as gift aid (and others that are unlikely to apply) of that is over 50k then you will pay some back on a sliding scale but at this stage you would be completing a SA tax return so be very aware.

Look at your P60 at the end of the year and this will tell you all you need to know (except if you have other income streams as mentioned above)

As someone who has to take part in the tax return system due to past self-employment, it absolutely is worth giving up a grand to avoid getting dragged into the tax return system unnecessarily! Having said that, a good accountant will save you more than they cost.

It's not just that the rules are unclear but that HMRC give wildly different and sometimes wrong advice themselves.

Thanks all for your input, I really appreciate it!

If your salary is £50K by the time your pension is taken into account you will not be repaying anything.

I earn £68K gross.

By the time my childcare vouchers and pension contributions come off I only have to re-pay about £300 of the child benefit in tax.

I would also add that it only takes me about 30 minutes to do the tax return and its worth it.

@GintyMcGinty I’m hoping so, but struggling to work out whether my pension contributions are deductible or not.

Yes, of course your pension contributions are deductable, why wouldn't they be?

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

Does it not depend on whether they have been deducted before tax or not?

It’s the “net pay arrangements” that confuses things

Pension contributions are not taxable.

You definitely wouldn't pay it this tax year 20-21 as its done on a tax year April to April so your salary would be around £40k.

From next tax year it depends but I definitely would not come out of the child benefits as it comes between £50k and £60k so at say £51k you will still get the vast majority of it. I was always nervous of tax returns but once you've done one they are really easy and its good to really understand the rules, takes about a day to learn rules when self employed as more complicated then form is quick to fill in, 30 mins is about right.

Pension does come off it you pay into it. When I was in the public sector I was in a final salary scheme which the employer paid so that wouldn't come off, it was in addition to my pay. In the private sector I had to pay in to my pension out of my salary, say 10% a year, making my take home pay less by 10% or so. In this case you do take it off. So if you earn £51k, pay 10% in from that £51k then you would take £5.1k off and be at £45.9k so under the threshold. If you have other earnings like property or from self-employment these have to be added though think there's now a £1k exemption for both so its above that.

So if you pay into the pension from your salary - you will see this from your payslip, yes you take it off. You can get salary calculators online to check if you aren't sure. If you ever are over you can make additional payments into a pension to make you under the threshold as long as you don't exceed your annual allowance but that's really high think its £40k per annum.

This implies teachers do pay into pensions based on earnings so the amount it says on your payslip you've paid in to pensions you take that off your gross salary. It looks like its around 10% for you so you will be fine as long as you don't have other income.

www.teacherspensions.co.uk/members/new-starter/understand-how-much-youll-pay.aspx

@isitjustlockdown has clarified that theirs is different. I didn’t know all pensions paid through payroll are paid before tax, now you’ve told me I know.

@isitjustlockdown is incorrect - all pension conts are paid from gross income, then tax deducted. If isitjyst is doing anything different they are an idiot as they're donating a nice chunk of their salary to hmrc unecessarily.

So take your gross salary, £52,000 for example, take off your annual pension conta (say 12 x £400 = £4800) and your salary for CB purposes is £47890.

My husband has a private sector pension where employer pays 12%, he pays 10% so in his case he takes the 10% off (take off the amount of end of year payslip) but not the 12% as he doesn't pay that.

Moneysavingexpert forum is very good for financial advice.

wow @titchy not sure why you feel the need to be rude, particularly whilst being incorrect. Not all pension is calculated on gross pay, there are two methods relief at source (net pay method) or gross tax basis.

With the former pension is calculated after tax is deducted and the tax relief is paid into the pension via the provider claiming it from HMRC, so you don't lose out, the tax benefit is just gained elsewhere (and additional relief is claimed back during self-assessment).

^ sorry I added the (net pay method) to the wrong type, I meant to add the brackets after "gross pay" not "relief at source".

Apologies! Didn't mean to be so snippy!

The OP is talking about a standard occ pension though which would be paid from gross salary.

@icantaffordahugetaxbill -

Having read the thread back, I am concerned I may have confused you. There are two types of pension contribution, before tax and after tax.

When you deal with calculating your child benefit tax they are handled as below:

Pension contributions paid before tax - these are taken off your normal salary. The figure you end up with should match your taxable income on your P60.

Pension contributions paid after-tax are considered under "deductions".

In my first message to you, I forgot about the salary side, only thinking of the deduction side, so I misunderstood your question.

Your salary would be after the tax comes out, but you wouldn't then add that again as a deduction if that makes sense?

Sorry if I have caused you confusion, I totally forgot about the salary adjustment part of the form.

@titchy Sorry I was probably a bit snippy too, it has been a long day!

I realise I was thinking of the deductions section of the child benefit tax, whereas the OPs would be dealt with under salary. I hope I haven't caused too much confusion.

I forgot the salary part as mine are dealt with in deductions.

Thank you Silkies, that’s a great explanation.

I am back to square one of confusion