You are here: Home - Household Bills - News -

Tax savvy higher rate taxpayers boost pensions contributions to shelter from reduced child benefit

0
Written by:
24/08/2012
A quarter of higher rate taxpayers are set to boost their pensions contributions to avoid paying tax from new rules set in motion to reduce child benefit payments.

From 7 January 2013, if one parent in a household earns more than £50,000 he or she will have to pay the new child benefit tax, regardless of which parent is claiming the child benefit and irrespective of the income earned by the second parent.

According to a survey by Prudential, of workers earning between £42,275 and £149,999 16%, or roughly 144,000 workers across the UK, expect their child benefit to be hit as a result of the new tax charge.

However, a quarter of these people say they may increase their monthly pension contributions in order to avoid the new child benefit tax charge.

Matthew Stephens, Prudential’s tax expert, said: “The new child benefit tax charge will be a real blow for many families next year, particularly in households where salaries are unevenly distributed and one parent is the main or sole breadwinner.

“There is, however, a strong case for a parent whose income is between £50,000 and £60,000 to make additional pension savings to avoid the new tax, and at the same time boost their retirement income.”

In the UK at present, families receive a child benefit payment of £1,055.60 a year for the eldest child and a further £696.80 a year for each additional child. Therefore a high-earning family with three children under 16 could find themselves up to £2,449.20 a year worse off under the new rules.

Stephens added: “Saving for retirement is absolutely vital, yet a quarter of higher rate taxpayers say they don’t contribute anything at all to a pension scheme, which is very worrying.

“Often this is because people believe they can’t afford to save, but as is the case for many families that will see their child benefit payments taxed from next year, not saving for retirement could be a far more costly option.”

Tag Box

Debt

Pension

Spending

Financial fitness

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

The essential Your Money guide to the April 2018 tax changes

As we head into the 2018/19 tax year, a number of key changes take place to existing policies while some new i...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

YourMoney.com Awards 2018

Now in their 21st year, our awards recognise the companies offering the best products and services to consumers

Money Tips of the Week

Read previous post:
2200714-map-germany
German GDP growth rate cools to 0.3% in Q2

Germany’s economic growth cooled to 0.3% in the second quarter, down from 0.5% expansion in Q1, the Federal Statistical Office...

Close