By paying more into a pension fund, it might be possible to keep your taxable salary just below £50,000, thus ensuring the client receives the full child benefit entitlement, while also enhancing their pension savings for later years.
Megan Jenkins, Partner at Saltus said: “Although it may seem tax effective to decline or not claim your child tax credit, it’s worth noting that without having the claim in place a non-working spouse will not receive their state pension credit for child raising years, thus reducing their potential entitlement to full state pension in retirement.
“This is why it's vital to plan for a household, rather than an individual when there is one earner, as although the situation may be that the tax benefit is fully tapered due to earnings it’s important that it is still claimed.
“For particularly high earners, the annual allowance means that there is no room to contribute at a level that can manage their tax position down to regain their child benefit."
“Pension contributions are a great way to manage your tax position and regain elements like your personal allowance and child benefit. It’s worth bearing in mind that if an employer allows you to do so via salary sacrifice, it can bring further benefits by reducing the gross salary rather than taking contributions from your net pay."
"For example, personal national insurance savings (this is even more valuable with the recent changes in NI rates), employers’ NI savings (in certain circumstances the employer may be generous enough to pay this saving into the employees’ pension as an additional contribution), reduced student loan repayments, and bringing back personal allowance for high earners and child benefit for those earning over £50k.”
5. Make the most of marriage or civil partnership.
The marriage allowance is a tax break that lets a spouse or civil partner transfer £1,260 of their personal allowance to the higher earning partner.
To qualify, you must not pay income tax, or your income must be below the Personal Allowance (£12,750). Your partner should pay Income Tax at the basic rate, which means their income is between £12,751 and £50,270 before receiving the marriage allowance.
The marriage allowance can be worth up to £252 in tax savings per year, yet around 2.4mn qualifying couples are failing to claim the benefit. However, more positive news is that the marriage allowance claims can be backdated up to four years.
Neil Rushton (pictured below), chartered financial planner and STEP associate at Old Mill, said: “Claiming the marriage allowance is a quick win for eligible married couples, a one-off application can be completed within minutes via the HMRC website. With additional planning there are further tax benefits for married couples to take advantage of. For example. the spouse exemption for inheritance tax."
