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Can you get your child benefit back?

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Families may be able to work round the income thresholds for child benefit with pension contributions, says a leading insurer.

Child benefit for higher earners was an early casualty of austerity, but new analysis from insurer Royal London says hundreds of thousands of working families are not taking advantage of a little-known connection between their pension contributions and their Child Benefit entitlement, at a cost of £170 million per year.

Since 2013, where one parent earns more than £50,000 per year, the family loses child benefit on a sliding scale. As soon as one earner hits £60,000 child benefit disappears completely.

However, when HMRC calculates earnings, it is on the basis of income net of pension contributions. As such, those who increase their pension contributions will lower their income for child benefit calculations. This is in addition to the tax relief available on pension contributions, which is likely to be at 40% for this salary bracket.

When the child benefit changes were introduced in 2013, the IFS estimated that around 320,000 families would fall within the £50,000-£60,000 earnings band. Royal London calculated that if each of these people were to contribute an additional £3,000 per year into their pension, they would reduce their Child Benefit Charge by 30% of the amount of Child Benefit received. For a family with two children this would be a gain of around £536 per year. If all families in this income bracket were to do this, it would be equivalent to £171m.

Steve Webb, director of policy at Royal London said: ‘For a higher earning family, putting money into a pension is already a very attractive option.   They benefit from higher rate tax relief on their contributions and may also get a matching contribution from their employer.  But what they may not be aware of is the additional advantage of reducing the tax charge they face as a higher income family receiving Child Benefit.  This is another reason for families in this income bracket to prioritise pension saving.”


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