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Where Taxpayers and Advisers Meet

Child Benefit HITC

SPC1968
Posts:2
Joined:Tue Dec 13, 2022 5:51 pm
Child Benefit HITC

Postby SPC1968 » Tue Dec 13, 2022 6:02 pm

Hi

I have fallen into the 40% tax band for tax years 21/22 and 22/23 and am about to complete self assessment forms. During this time I have received Child Benefit for 3 kids so approx £50/week

I understand that unless I do something about it paying tax at 40% means that I am liable for the High Income Tax Charge and may now need to repay some or all of the benefit received.

However, I believe that if I make pension contributions, these can be grossed up and reduce my top line income on which tax is calculated therby allowing me to keep hold of the benefit received.

If I make the contributions before 6 April I assume that I can reduce/keep the child benefit for 22/3. My question is whether I can make contributions now but backdate them to 21/22 to claim relief for that tax year retrospectively ? I have seen reference to a 3 year carry back and carry forward but can't find anything specific

Total contributions will all be made from salary in the 40% band and therefore I believe be eligible to be grossed up 40%. Contributions will not exceed my salary

If I can, is there any particular wording I need to use when dealing with the pension company / HMRC ? Can anyone direct me to any particular tax references to quote when setting this up.

Thanks very much in advance

Lambs
Posts:1618
Joined:Wed Aug 06, 2008 3:15 pm

Re: Child Benefit HITC

Postby Lambs » Tue Dec 13, 2022 6:49 pm

S,

Unfortunately, personal pension contributions CANNOT be carried back to previous tax years. There is provision for unused pension Annual Allowance from prior years to be rolled up and utilised in whatever is the current year, but not backwards.

The only thing that could be carried back now would be qualifying charitable donations under Gift Aid, which rank for personal Income Tax relief in similar fashion to private pensions. Of course you will not benefit personally from making a donation in the same way as you eventually would by making a personal pension contribution BUT if you were going to make those donations anyway (or have already made those donations this year) then you can make an election to carry them back from the current 2022/23 tax year to 2021/22.

However, note the election has to be carefully managed: the legislation was poorly (narrowly) drafted and is rigorously applied by HMRC - see for example -

https://www.litrg.org.uk/tax-guides/savers-property-owners-and-other-tax-issues/giving-charity#:~:text=the%20same%20amount.-,Can%20I%20carry%20back%20Gift%20Aid%20donations%3F,now%20a%20basic%20rate%20taxpayer.

Looking at 2021/22 if you are only just caught, in terms of income level and thresholds, then you are not too late to make a claim for relief for things like use of home as office/homeworking expenses, professional subscriptions, etc. - they would reduce your tax bill AND potentially save you on your HICBC in that year (unlikely to reduce your exposure by thousands but possibly a few hundred pounds?).

I am assuming you are accurate with the tax years under consideration: if you meant 2020/21 and 2021/22 then the Gift Aid option may be a bust.

Regards,

Lambs

SPC1968
Posts:2
Joined:Tue Dec 13, 2022 5:51 pm

Re: Child Benefit HITC

Postby SPC1968 » Tue Dec 13, 2022 7:33 pm

Thanks for your response Lambs

Will start totting up professional subs and have a look at working from home deductions as was working from home due to covid

Will look into the pension contribution for this year

Thanks again

Cheers

Lambs
Posts:1618
Joined:Wed Aug 06, 2008 3:15 pm

Re: Child Benefit HITC

Postby Lambs » Tue Dec 13, 2022 7:47 pm

S,

Just to be clear, these must be expenses that you have incurred for work and have NOT been reimbursed for already.

Your membership(s) will hopefully be on the approved list here:

https://www.gov.uk/government/publications/professional-bodies-approved-for-tax-relief-list-3

Regards,

Lambs


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