From January this year a change in the child benefit system has meant that many higher earners will have their child benefit either reduced or stopped completely. In some cases people could be losing thousands of pounds a year in benefit, which could have a serious impact on their household finances.
There a few ways to help keep your child benefit payments with investing in a pension scheme being one of them.
Pension Tax Relief and Child Benefit
If you don’t already pay into a salary sacrifice, occupational or private pension then you could consider one of these options to help reduce your taxable pay. By reducing your taxable pay you can take your earnings below the higher rate tax threshold, which should mean you can continue to receive your child benefit payments.
If you already pay into a pension you could think about paying more into your current pension scheme, which could have the same effect of lowering your taxable income to a level below the higher rate tax threshold.
Before taking out a pension or increasing your pension payments, you should explore all of the possible outcomes of reducing your taxable income in this way. A pension is not for everyone but could be a good option for you.
Seeking independent financial advice is always recommended before making this type of decision.
If you are a 40% tax payer and already pay into a private pension it is also worth knowing that you could be entitled to a further 20% extra tax relief on your pension payments. Many people wrongly assume they are receiving the pension tax relief they are entitled to automatically. If you are not claiming the extra tax relief you could be due a substantial pension tax rebate.
