Can you avoid the child benefit tax charge?

Child benefit starts to reduce if one of the parents earns more than £50,000.

Depending on your income and the level of pension contributions that you are already making, it may be possible to avoid the Child benefit tax charge by making additional pension contributions.

Alternatively, if both partners pay into a pension but only one is affected by the changes to child benefit rules, it may more suitable to redirect the lower earner’s contributions to the higher earner’s pension plan to avoid the benefit charge.

Depending on your income and the level of pension contributions that you are already making, it may be possible to avoid the Child benefit tax charge by making additional pension contributions

As an example, child benefit would be worth £2,449 to a family with three children. This benefit is cancelled out by the tax charge if the taxable income of the highest earner exceeds £60,000. There’s no tax charge if the highest earner has income of £50,000 or less.

A pension contribution reduces the level of taxable income and thus, the tax charge can be avoided. Furthermore, the combination of higher rate tax relief on the contribution plus the child benefit tax charge saved can lead to effective rates of tax relief as high as 64% for an example family with three children.

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