[davyk31]

I haven’t got any child benefit for the kids for a few years due to being over the threshold for higher earners. Instead of getting the money and paying back I didn’t take it. Now cut back my hours and should quality again from the new tax year but my question is as regards this current year

Can a claim be backdated to include from April 2022?

Do large pension contributions in this current year be taken to reduce income and hence maybe qualify for the benefit despite gross earnings being higher. My thinking is that the pension contribution effectively reduces taxable income.

Then is it assessed only on employment income or are capital gains by selling shares counted in the calcs?

I’m thinking this current year won’t qualify but worth taking any advice on here.

[isleaiw1]

from the GOV website

To work out if your income is over the threshold, you’ll need to work out your ‘adjusted net income’.

Your adjusted net income is your total taxable income before any allowances and not including things like Gift Aid. Your total taxable income includes interest from savings and dividends.

CGT will be separate and not included as its not income.

GOV website is very vague about backpayments, if any.

The rules on Child Benefit are at odds with so many other things, as they are applied to a couple living as though in a partnership, unlike income tax. You can earn 99999 as a couple and qualify and 60000 as an individual and not. Madness.

Another of my pet peeves!

[davyk31]

Thanks. So adjusted net income is taxable income before any allowances. Does that mean it’s total earnings so the pension contributions have no impact?

It is a very strange threshold for sure and as you say a couple earning just under £50k each will qualify.

[bishbosh]

I fell foul of this a few years ago, ended up doing salary sacrifice into a pension scheme to bring my taxable pay below the £50k threshold.

[Scoobyd]

Originally Posted by davyk31

Thanks. So adjusted net income is taxable income before any allowances. Does that mean it’s total earnings so the pension contributions have no impact?

It is a very strange threshold for sure and as you say a couple earning just under £50k each will qualify.

Pension contributions do have an impact and can reduce your earnings below the £50k to help you obtain child benefit again, drop you out of higher rate tax bands, avoid other tax traps etc.

The income used by HMRC to calculate the child benefit tax charge is your adjusted net income. Any pension contributions you make will reduce your adjusted net income. If you pay enough into a pension to get your income below £50k then you avoid the charge and get to benefit from the tax relief on the contributions too. It can be a win win meaning the actual pension contribution ends up costing you very little!

Pensions are great

[davyk31]

Thanks for that.

[badgerbrock72]

Interesting topic,

Just to clarify, adjusted net income basically means total income minus pension contributions etc

So someone earning say 52k and making annual pension contributions direct from salary of over £2k per year then doesn’t fall into the 50k+ trap? Is that how it works?

Thanks all

[NotGotABimmer23]

Originally Posted by badgerbrock72

Interesting topic,

Just to clarify, adjusted net income basically means total income minus pension contributions etc

So someone earning say 52k and making annual pension contributions direct from salary of over £2k per year then doesn’t fall into the 50k+ trap? Is that how it works?

Thanks all

It's taxable income minus pension. Most people's pension is salary sacrifice anyway so in that case you just use the taxable income. If you pay pension after tax then for the sake of child benefit you can take this off your taxable income to get the adjusted income.

[davyk31]

I made a large pension contribution personally into a new pension scheme so by my reckoning that can be taken from my earnings to give my adjusted income? Is that correct?

[davyk31]

Seems it can’t be backdated too far sadly and one child hit 18 a couple of weeks ago as well.

[NickP X7]

Originally Posted by davyk31

I made a large pension contribution personally into a new pension scheme so by my reckoning that can be taken from my earnings to give my adjusted income? Is that correct?

Yes that's correct, and remember it's the grossed up pension contribution that is deducted from your gross income to arrive at your adjusted income.

[tj_g]

Don’t forget that if you are above the threshold, NIC’s can still be claimed.
We are above the threshold for child benefit but my wife claims the CB, although we select to not receive it so that I don’t have to pay it back in tax, but she gets the NIC’s.

I know it’s a little off topic, but just in case anyone is currently not banking the NIC’s for a non-working parent.

[DB118D]

What's the mechanism for notifying HMRC? Looks increasingly like ill be bumped to where no CB is payable (before pension contributions) shortly and could be doing without a large bill

[davyk31]

You can notify them online if becoming a higher earner and you can select to cease the benefit. Or on the same system you can restart the benefit of income falls.

Also seems that it can be backdated this tax year and the two previous if you are restarting the benefit due to lower income.

[DB118D]

I'll have a look online then. I need to look at tax relief on pensions contributions, but thats a whole other minefield!