OCL Accountancy | Child Benefit: avoid high income tax charges and fund your retirement

If you or your partner receive Child Benefit and either of you earn over £50,000 in a tax year, an income tax charge will apply to the highest earner. This charge is designed to claw back the Child Benefit received.

If your income is over £60,000, the tax charge reclaims all the Child Benefit received.

With earnings between £50,000 to £60,000 the charge is a proportion of the Child Benefit received.

The tax charge is collected through submission of a tax return for the higher earner and it is calculated as 1% of the amount of Child Benefit received for every £100 of adjusted net income over £50,000.

Adjusted net income is reduced by the pension contributions you have made within the tax year. Whether they are made via your employer through a salary sacrifice arrangement or to a personal pension.

Within the same tax year as the Child Benefit charge, should you decide to make a pension contribution, reducing your adjusted net income below £50,000, you will find that the Child Benefit charge no longer arises.

For tax saving tips contact the OCL team – call Tristan Wilcox-Jones, Samantha Taylor or Lucas Knight on 01225 445507 | oclaccountancy.com