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68% Tax Relief and Child Benefit Back68% Tax Relief and Child Benefit Back.

Fight Back and Reclaim your Child Benefit.

It has been well documented that child benefit has reduced if you have a higher rate tax paying parent and stops completely if one parent earns £50,000 pa or more. One million families have lost their child benefit.

So what have we lost? For families with two children this means a loss of £1,752 pa. For a family with three children, this means a loss of £2,449 pa.

What have we missed? £50,000 is not just your gross income. It is your adjusted net income.

  • Adjusted net income is Gross Income less personal (i.e. your own) pension contributions

Basic Income Tax Payable on £50,000 Salary, 3 Children

  • Nil Tax on Personal Allowance £8,105 = £0 Tax
  • 20% Tax on £ £34,370 = £6,874 Tax
  • 40% Tax on £7,525 = £3,010 Tax
  • Total Tax Paid = £9,884 + Lost Child Benefit for £2,449
  • Loss £12,333

Getting Net Your Net Adjusted Taxable Income to below £50,000

Suggestion 1 - Talk to your employer about Salary Sacrifice Income or Sacrifice Bonus and for them to pay this into a pension scheme for you.
Suggestion 2 - If you run your own business, reduce salary, reduce dividends and pay into a pension scheme to reduce your net adjusted taxable income

The numbers if you have 3 children

  • Salary/Bonus/Dividend Sacrifice: £10,000 + Employers National Insurance Saving
  • New Net Income £40,000 – you now qualify for full child benefit £2,449
  • Effective Pension Contribution by Employer £10,000 + ER’s NIC saving 13.8% £1,380
  • Total Pension Contribution £11,380
  • Your Tax Liability on £40,000: £8,105 – Nil Tax, £31,895 X 20% = £8,104 Tax (compared to tax before £9,884)
  • Total Personal National Insurance Saved (as you earn less) 12% = £1,200

Total Additional Benefit to you/your family:

  • Pension Fund £11,380
  • Personal National Insurance Saved £1,200
  • Child Benefit £2,449
  • Tax Saved £1,780
  • Total Benefit/Savings £16,809

An effective child benefit/pension tax relief rate of 68.09% on a £10,000 pension contribution

A slightly lower effective rate if you are a business owner and pay dividends but still around 55%.

Contact us for help with pensions, tax relief and reclaiming your child benefit back.

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