Client who will receive a reduction in Child Benefit
If a client will see a reduction in their Child Benefit, they may want to consider paying a pension contribution
- For 2022/23, the Child Benefit is £21.805 per week for the oldest child and £14.45 per week for each other child
- However there is a Child Benefit High Income Charge which offsets the Child Benefit for those with ‘adjusted net income’ in excess of £50,000
- For every £100 of income above threshold, the tax charge will equal 1% of the total rate of Child Benefit
- Therefore once the client’s income reaches £60,000 the value of Child Benefit will be matched by the tax charge
A pension contribution will reduce the ‘adjusted net income’
So what will be the effective rate of tax relief if the client pays a pension contribution?