If I increase my contributions, can I keep my child benefit payments?

If you have children, pension contributions can ensure the value of your child benefit is saved for your family, rather than being lost to the child benefit tax charge.

Child benefit, worth over £2,500 a year to a family with three children, is cancelled out by the child benefit tax charge if the taxable income of the highest earner reaches £60,000. There’s no tax charge if the highest earner has income of £50,000 or less, and the tax charge is tapered from £50,000 – £60,000.

As a pension contribution reduces your taxable income, paying more could reduce the tax charge – even to zero. The combination of higher rate tax relief on the contribution as well as the child benefit tax charge saved can give an effective rate of tax relief of as much as 65% for a family with three children.

 

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More information can be found here. It’s also a good idea to get some advice on this subject.

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