How to beat the changes to child benefit
In an effort to save £1.5 billion in the next year, HMRC have introduced the HICB. As of the 7th January 2013, child benefit will be means-tested; taxpayers with an income greater than £50,000 who also receive…
10 Minute Read
In an effort to save £1.5 billion in the next year, HMRC have introduced the HICB. As of the 7th January 2013, child benefit will be means-tested; taxpayers with an income greater than £50,000 who also receive child benefit will need to decide whether to stop receiving these benefits, or pay a charge via self-assessment. By now, you will have made this decision, and today, SimpleTax is here to explain ways we can beat the changes to child benefit. So, here’s how you can soften the blow:
Top up your pension
If, for example, you earn £53,000, why not set aside £3,000 for your pension? Decreasing your earnings to £50,000 makes you eligible for full child benefit; Hooray! Oh, and there’s the added bonus of a reduced income tax charge. Paying money into your pension results in a lower income tax bill; double hooray!
Salary sacrifice scheme
If you just miss out on child benefit, then this is a fantastic way to reclaim what is yours. You can ask your employer to run a salary sacrifice scheme, where you can replace your taxable earnings with non-taxable benefits. You can choose how to receive these benefits, for example, childcare vouchers, or your workplace pension scheme. If you reduce your salary below £50,000 you are entitled to receive full child benefit.
Transfer your assets
If your spouse or partner has a lower income than you, then you could always transfer your assets to them. Transferring your savings and investments will reduce your taxable income.
Put it in a high interest ISA
If you chose to keep receiving child benefit, put the benefit in a high interest ISA. This way, your benefit will earn interest, offsetting the self-assessment tax charge.
Watch your spending
This isn’t a way to ‘beat’ the child benefit, but it certainly does soften the blow; if you did lose your child benefit, you need to watch what you spend. Where could you spend less money? Do you really need everything you repeatedly buy on a weekly basis? Things like this will hopefully offset the loss of child benefit.
Give to charity
If you’re feeling extra generous, why don’t you give some money to charity? If, for example, you earn £51,000, giving £1,000 will reduce your net income to £50,000. Whilst also doing a very good deed, giving this money to charity can also make you legible to full child benefit.
There ARE ways to beat the child benefit charge, and hopefully SimpleTax has helped you realise this. The great thing is, you can mix and match these tax savings tips to suit your specific needs. For example, you can ask your employer to run a salary sacrifice scheme, transfer some of your assets to your spouse and also watch your spending. Options are in an endless supply and can be tailored to specific incomes and needs.
Trusted by over 10,000 subscribers
You don't need to be an expert to complete your self assessment tax return.
Managing your finances has never been so easy.
Start you self assessment tax return today for free.Get Started
5 Essential Apps For Self Employed Freelancers
15 Feb 2021
What Will The 2021 Budget Include?
12 Feb 2021
HMRC’s Recent Investigation Into Airbnb Landlords
12 Feb 2021
How GoSimpleTax Works
Simply register for free with your full name and email address.
Select Your Income
Select the income you receive and follow the hints and tips for potential tax savings.
Validate Your Information
Validate your personal information and submit directly to HMRC to get confirmation in just seconds.
Work Anywhere, With Any Device
Gone are the days of fretting over a calculator surrounded by scraps of paper at the eleventh hour.
GoSimpleTax’s tax return software uses the information you upload in real time to calculate your income and expenditure, working out the tax you owe and sending you helpful notifications when there’s the possibility of a mistake.
"The software is intuitive and proved very easy to navigate. I found the whole process refreshingly simple. I saved a lot of money too!"
"Easy to use and value for money. Everything you need to do your tax."
"It fills in all the forms and sends them to the Inland Revenue. Not expensive either. Takes the stress out of doing your tax return online."