Get back your child benefit

The austerity years produced many small changes to the tax and benefit system that cut people’s entitlements. One of them was the restriction of child benefit payments where either parent earns over £50,000 a year. For every £100 of earnings above that level you lose 1% of your child benefit – in fact you still get the benefit paid, but part of it is clawed back from higher income tax payments via your tax code. If you earn over £60,000 you get no child benefit at all.

The austerity years produced many small changes to the tax and benefit system that cut people’s entitlements. One of them was the restriction of child benefit payments where either parent earns over £50,000 a year. For every £100 of earnings above that level you lose 1% of your child benefit – in fact you still get the benefit paid, but part of it is clawed back from higher income tax payments via your tax code. If you earn over £60,000 you get no child benefit at all.

Hundreds of thousands of people are affected by this rule. But many could easily avoid losing valuable (and tax-free) child benefit payments. All they have to do is to make additional contributions to their company or personal pension schemes. These payments are deducted from gross salary, and the trick is to pay just enough into the pension to reduce your earnings below the £50,000 threshold.

Do this right and the amount of your salary you give up – net of tax – is less than the amount you collect in tax-free child benefit payments. This is one of the easiest tax battles you can win.

Of course, thanks to the UK’s madly complicated tax system, there are wrinkles, so it’s a good idea to check out the numbers with an adviser before taking action.

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