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Child Benefit Advice - The Daily Telegraph, 25th January 2024

Jason Shares His Ideas About How to Make the Most of Your Child Benefit - With Esther Shaw At The Daily Telegraph



The original article was published in Telegraph Money on 25th January 2024, but is only available to Daily Telegraph subscribers. As part of our mission to empower as many people as possible to make better financial decisions, we have published below all the information Jason shared with them, so you get the maximum benefit from it (not just from what was published).

 

A QUICK SUMMARY OF THE RULES

 

Child Benefit is paid at the rate of £24 per week for the eldest or only child and £15.90 per week for other children. This means that someone with one eligible child will get £1,248 p.a., increasing to £2,074.80 for two children and £2,901.60 for three.

 

A High Income Child Benefit Charge applies if you or your partner has an “adjusted net income” of over £50,000.

 

Adjusted net income is your total taxable income minus certain tax reliefs, such as Gift Aid charity donations and pension contributions. The charge equates to 1% of the Child Benefit for every £100 of adjusted net income over £50,000 each tax year. This means that once the higher earner’s income exceeds £60,000, the charge is equal to the total amount of the Child Benefit.

 

If you know that your income will exceed £60,000, you can choose to receive the Child Benefit and then pay the equivalent tax charge via your self-assessment, or you can opt out of Child Benefit.


MAKE SURE THAT THE RIGHT PERSON CLAIMS CHILD BENEFIT

 

If you are in a couple where one person works and the other is looking after your children, make sure that it is the non-working partner who claims Child Benefit. That way, they will build up National Insurance credits which will boost their state pension entitlement. The working partner will already be receiving these credits through their employment.

 

MAKE SURE THAT CHARITABLE DONATIONS ARE IN THE HIGHER EARNER'S NAME

 

If you are in a couple and the higher earner’s income is at or around the £50,000 to £60,000 level, it might make sense for any household charitable donations to be in the higher earner’s name. This will mean that you make the most of the Gift Aid rules but might also mean that you keep more of your Child Benefit. 


THINK ABOUT PENSION CONTRIBUTIONS


Imagine that you had adjusted net income of £60,000 and had three young children.

 

If you paid £10,000 gross into a pension, this would allow you to keep your £2,901.60 of Child Benefit. You would also obtain 40% tax relief on almost all of our pension contribution, given that higher rate tax starts at income of £50,270.

 

After income tax relief, that £10,000 of pension contribution would have cost you £6,054* but you would also have been able to keep your £2,901.60 of Child Benefit. Therefore, the true cost to you would have been just £3,152.40. That’s the equivalent of over 68% ‘tax relief’!

 

*This is calculated as £270 on which you get 20% tax relief and £9,730 on which you can achieve 40% tax relief. Total tax relief is £3,946.


COLLECT THE CHILD BENEFIT, SAVE IT AND THE PAY IT BACK VIA SELF-ASSESSMENT


Even if you knew that you would have to pay a High Income Child Benefit Charge because your income was well over £60,000, you could opt to receive the Child Benefit, put it into a regular savings account, earn some interest and then pay it back via your tax return.

 

For example, someone with one child gets £1,248 p.a. of Child Benefit which is the equivalent of £104 per month. Via the Nationwide Regular Flex Saver you can save up to £200 p/m and get 8% AER. After 12 months, this £104 p/m would have earned £53 of gross interest.

 

Someone with two children gets £2,074.80 p.a. of Child Benefit which is the equivalent of £172.90 per month. After 12 months, this £172.90 p/m would have earned £89 of gross interest.

 

Depending on when you normally submit your tax return there may be scope to earn even more interest.

 

This could be viewed as “free money” although I recommend that you put a value on your own time. If the time it takes you outweighs the monetary benefit, it’s not worth it. It doesn’t take long to burn through £53 or £89 worth of free time.


GET IN TOUCH

 

If you would like to discuss anything raised in this article, or any other help you need to plan your own financial future, please call us for a free consultation on 020 3488 9505.



The value of your investments can go down as well as up, so you could get back less

than you invested.

Tax and Estate planning is not regulated by the Financial Conduct Authority.


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