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Home » Huggababy News » Child Benefit Withdrawal - There's Always A Way!
Child Benefit Withdrawal - There's Always A Way!
It’s an ill wind that blows no good; even the proposed withdrawal of Child Benefits from high earners after 2013 are a business opportunity for someone.
Step forward Colin Jelley, tax expert at insurance giant Skandia, who points out how parents could hang onto their Child Benefit by hiding some of their income in a pension. Because payments into retirement funds are taken out of pre-tax income, this should avoid the new restrictions announced by the Chancellor.
Mr Jelley said: “Many parents may be able to side step the Government’s proposed attack on child benefit by using pension contributions to ensure their taxable income is below the £43,875 where higher rate tax kicks in.
“From 2013, someone with two children earning £45,000 stands to lose £1,752 each year in child benefit, using current rates. It depends on the details of the new rules but a pension contribution of £1,500 a year may mean they continue to receive the child benefit and the pension contribution would only cost £975 because of the tax relief given by the Government.
“Effectively, they would have £1,500 in their pension and have £777 more in their pocket than if they’d paid nothing into their pension.”
Bear in mind, though, that he was speaking shortly after the Chancellor sat down and details of the new rules have yet to be published. Even so, it looks as though the merry-go-round of new tax rules followed by new ways to get round them will keep spinning for a while yet.
Tags: Chancellor, child benefit, cuts, government, insurance, parents, pension, pensions, retirement funds, Skandia, tax relief
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