180,000 single wage families set to lose child ...
180,000 single wage families set to lose child benefit from April 2013
1 Years ago at 16:27
Hundreds of thousands of parents may be better off paying more of their earnings directly into their pensions to avoid losing any child benefit entitlement if a Treasury plan to hit higher earning parents goes ahead.
With the 2013 deadline looming, George Osborne is yet to reveal the detail behind changes to the child benefit system, announced in October 2010. It could lead to every household with a higher rate taxpayer losing child benefit from April 2013 - more than £1,750 a year for a family with two eligible children.
Research from NFU Mutual, the insurance, pension and investment specialist, shows that an estimated 680,000 families would lose out if child benefit is cut for high-rate tax payers with around 180,000 of these being families with just one earning parent.
And calculations released by the insurance, pensions and investment specialist show that if these drastic changes did come into force, an estimated 143,000 families currently paying 40% income tax may be better off (in terms of net income) if they paid more into their pension.
Pension contributions could allow many parents to dip below the higher rate threshold and maintain the income from child benefit payments, while of course helping to provide an income in retirement.
The result, for these estimated 143,000 families is that the extra pension contribution required would be less than they would get back in child benefit.
Sean McCann, personal finance specialist at NFU Mutual, said: "We're still waiting for the Chancellor to show his hand on this issue but we know that change to the child benefit system is coming for families paying 40% income tax.
"Losing child benefit payments could make a big dent in many household incomes, but for many parents, putting a little more into the pension in order to bring down earnings below the higher rate threshold could help to make the most of their income.
"The tax efficiency of pension contributions could be key to these families from April 2013 but it's likely that, as ever, being tax savvy and taking financial advice will be as important this year as next.
"Whatever the outcome, it's vital that all parents start making the most of the tax planning opportunities available to them."
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