Make too much for child benefit? Advice?

[Confusednoodle]

I’m hoping someone can offer some advice. I’ve just got a job that’s over the High Income Child Benefit Charge threshold of £50,000 (new job is £62k + bonus). From looking at the government website I see I will either now be taxed for my child benefit, or I can opt out of the benefit altogether. How do I figure out which makes the most financial sense?

We have 2 children we recieve CB for so £145 a month currently. Partner only earns £12k a year so I do think the policy is unfair - if we were earning the same but split as £37k each we wouldn’t have this problem. But there we go. Is anyone else in this situation and what do you do?

Generally any money you would be paying tax on at a higher rate, put in a pension.

If you are already making full use of employer matching contributions, then the question is whether your pension is done via salary sacrifice or not.

If yes, then bump up your contribs for the rest of the tax year to shift the excess money into your pension, then reduce them again (salary sacrifice saves you the NI on your contributions as well as income tax).
If no, then open up a low charge SIPP and bung the money in there. It's perfectly ok to have more than one personal pension. You just need to claim the tax back yourself but that's not hard. (If you really CBA then just increase work pension contributions as above).

Once you're just paying normal tax on your take-home THEN ISA time.

This is all just rule of thumb though, if you have special circumstances (e.g. house from hell and desperate to move - been there) then your decisions should take account of them.

@modgepodge Ah okay thanks for the info. Kids both born after 2018 so we’ve never had childcare vouchers. Yes I agree I don’t want to pay £13k extra into pension right now. That’s a lot of money to us! I want to actually experience having the extra money now really.

@iamjustwinginglife I agree, it’s really unfair!

@Margo34 I don’t understand the NI at all unfortunately. At least we claimed for the kids for a while so they’ll both have been assigned NI numbers? Or is there some extra element to it, too?

over £60k it’s not worth having, you pay it back. Between £50-60k it’s just about worth it.

when I transitioned between salary bands I kept the CB and started doing self assessment tax returns as my new salary appeared mid way through a tax year. First tax year after pension etc I was under. Then I stopped receiving CB from 1 April as I knew I’d be over for that tax year.

if you do over receive CB a little and incur a charge, they just adjust your tax code like any other tax amount owed. So don’t worry you’ll get a massive demand for payment

No I don’t think he pays any tax, he earns very low and is technically part time - although full hours for the job (teaching assistant).

What would moving the CB into his name do?
We just have one joint bank account. I assume it’s currently in my name as I always sort bills/life admin stuff but I wasn’t aware the name makes any practical difference.

So perhaps I should claim CB til April and then cancel then? I earn £49k now so quite close to the threshold already. I wonder if 4 months on my higher salary would bump it over and I’d have to do a tax return (this worries me).

I was in a similar position for 21/22 as I was on mat leave for part of the year. Luckily pension contributions and charity donations brought me just under £50k earnings.

As your other half isn't earning enough to pay NI you're better putting the CB in their name as they get NI credits which count towards their state pension when theyre older. If they don't have enough years of these credits they won't get the full pension amount.

I know I'll be over the threshold for 22/23 but I'm on mat leave 23/24 so it's handy to know I can repay this year's CB via my tax code

www.gov.uk/new-state-pension/your-national-insurance-record-and-your-state-pension

This explains it better than I did

You’re already over 60k without the bonus so you you would have to pay it all back. Trust me it’s not worth it. Once you start doing self assessment, they will keep asking for them

*so opt out of it!

£49k / 12 = 4.08
7 months of that salary = 28.54k

£62k / 12 = 5.17
5 months of that salary = 25.84k

total earnings before pension deducted = 54.37k.

not sure how much you put away in pension. But assuming it’s nothing at all, you’re in the window 50-60k which means it’s worth keeping CB. But then definitely stop it from 1 April.

you also need to know when bonus is paid, as if that is before 1 April that might tip you over

I see your point but on that salary you can more than manage plus you have your partners income also. From that point of view the line has to be drawn some where.

please double check my calculations though, am doing it on the fly whilst cooking tea!

When my earnings went over £60k, we continued to claim because I was working on a fixed term contract so was unsure whether they would remain at that level. If was a hassle to complete a tax return as we were then paying it all back.

If you are fairly sure your earnings will remain above £60k I would opt out as it's easier.

It would protect your DH’s state pension entitlement, OP. He’ll get NI credits while he’s claiming CB, even if you don’t take the money. It will mean he’ll be eligible for more of the state pension when he eventually reaches retirement age, for no cost to you.

That’s only if he doesn’t work to look after the kids. He is working so will be getting all the ni credits he’s entitled to.

Yes - definitely move the CB into your DH name. Even if you don't claim the money. This will mean he gets NI credits even though he is not earning enough. Which means if/when he starts earning again, his NI "history" is full - rather than having several years gap - which cost c£800 to back fill. Without a full NI history (which means 35 years of NI payments) he will not get a full state pension.

Thanks this is really helpful! Thank you!! At the moment I pay quite high pension contributions (I think 11%) so yeah looks like its worth it. I will probably cancel CB just before April then.

Thanks @MatildaJayne for explaining the NI thing. So I could move CB into his name, but opt to not receive the payments?

Thank you!!

If you can, I would strongly recommend you put some of the pay rise into a pension. 6% won't give you a comfortable retirement. If you have moved from public to private sector and from £49k-£62k, I would say the entire raise is very roughly equivalent to the amount you are losing on your pension so to not put it in is, kind of, robbing your future self. Plus it is all taxes at 40% and makes you lose your CB - it makes lots of sense to up your pension contributions.

@Confusednoodle correct OP, move CB to DHs name and opt out of receiving the payment.