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Increasing pension contributions to enable eligibility for child benefit

2

Comments

  • robin61
    robin61 Posts: 677 Forumite
    edited 14 October 2016 at 11:55AM
    Apparently it was designed so that a couple each earning £49,999 both with personal tax allowances of £11k get child benefit in full whereas one person supporting his family on £60k and only one allowance of £11k loses the lot.
    Not awfully fair really is it ?
    Personally I don't blame the OP if he can get around it then good luck to him.
    He didn't make the rules. No doubt he has been sticking to the rules and paying 40% tax on a big slice of his income for years. Rules work both ways. Not just one way.
  • zagfles
    zagfles Posts: 20,274
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    edited 14 October 2016 at 11:55AM
    You realise child benefit only exists because we have one of the most family unfriendly tax system in the world don't you? One earner supporting 4 people is taxed the same as one earner who just supports themselves.

    In most other countries, family members are taken account of in the tax system, non earners can use their tax allowance against the income that supports them.

    In France for instance the OP would get no child benefit. Instead the family's income would be split into 3 parts and he'd pay the same tax as 3 people earning £25k, instead of one person earning £75k. That would mean 3 tax allowances, and no higher rate tax. Saving over £10,000 in tax.

    Here he gets under £1,800 in child ben, and that's if he bothers jumping through hoops to sal sac enough into his pension to get his income below £50k.

    Yet just because that £1800 is a paid as "welfare", people get all sanctimonious about it, whereas getting a £10k tax saving like in other countries doesn't seem bother people. Cos it's not that dirty word, "welfare", is it :rotfl:
  • zagfles
    zagfles Posts: 20,274
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    sandsy wrote: »
    This is a money saving website, designed to help people create a better financial future for themselves. And that's exactly what's going on here - all above board and totally legally, irrespective of how much anyone earns.
    Better not mention that the OP could go the whole hog and sacrifice his salary right down to NMW and claim around £6-7k in tax credits as well as child ben ;)
  • robin61
    robin61 Posts: 677 Forumite
    edited 13 October 2016 at 8:27PM
    zagfles wrote: »
    Better not mention that the OP could go the whole hog and sacrifice his salary right down to NMW and claim around £6-7k in tax credits as well as child ben ;)


    Nor should we mention that he could also transfer some of his savings into a personal pension and get his assessable gross income down to around £4k and get nearly 11k tax credits. It's actually around 6.5 k to get the max but they will ignore £2.5 k the first year someone claims
    Providing he has some carriy forward annual allowance to play with. He will also get some tax relief on the pension contributions of course.
  • I took advantage of this to make sure my kids got the maximum student grants and Bursaries, by paying loads (£15K plus) into my pension to bring my salary to below £25K - then we had to use savings for any major expenditure, but free, legal and moral (I'll hopefully retire early and pay tax on my pension)

    I got the idea off a work mate who increased his pension payments by £1000 a year so that his daughter got the Full EMA in sixth form of £30 a week (now defunct)
  • zagfles wrote: »
    Better not mention that the OP could go the whole hog and sacrifice his salary right down to NMW and claim around £6-7k in tax credits as well as child ben ;)

    Yes. A good legal loophole.
  • bigadaj
    bigadaj Posts: 11,531
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    zagfles wrote: »
    Better not mention that the OP could go the whole hog and sacrifice his salary right down to NMW and claim around £6-7k in tax credits as well as child ben ;)

    Yes'm that's the point when things go too far in my opinion.

    Contributions to get child benefit back or even remove all higher rate tax doesn't seem unreasonable to me, whereas putting huge amounts in to gain tax credits does seem wrong.

    The interaction of tax and benefits is unnecessarily complicated, the problem being its even more complicated a process to end up simplifying things in a fair manner.
  • Triumph13
    Triumph13 Posts: 1,730
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    bigadaj wrote: »
    The interaction of tax and benefits is unnecessarily complicated.
    Yep. It leads to things like the fact that this year I will, for the first time, be claiming tax relief for 'my share' of the tax on my charitable contributions, whereas before I'd always not done so on the grounds that I believed it was my moral duty to pay my fair share of tax.
  • TheShape
    TheShape Posts: 1,777
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    zagfles wrote: »
    Better not mention that the OP could go the whole hog and sacrifice his salary right down to NMW and claim around £6-7k in tax credits as well as child ben ;)

    And, hypothetically speaking, could a single person paying basic rate tax reduce their income through salary sacrifice into a pension and claim Working Tax Credits?
  • robin61
    robin61 Posts: 677 Forumite
    edited 13 October 2016 at 10:49PM
    TheShape wrote: »
    And, hypothetically speaking, could a single person paying basic rate tax reduce their income through salary sacrifice into a pension and claim Working Tax Credits?
    Salary sacrifice will reduce the gross income on your P60. So yes.
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