Paul Phillis & Co Limited

Chartered Accountants

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11a Corelli Street

Newport NP19 7AR

01633 267372


March 2014

Although this new Income Tax charge was introduced in January 2013, 2013/14 is the first full tax year for the charge to take effect.  The charge relates to all individuals who have net relevant income of £50,000 or more and they, or their partner, are in receipt of child benefit.

The charge is based upon the amount of child benefit received, and income earned, and gradually increases until income reaches £60,000 where the charge is then equal to 100% of the child benefit payments received.

One way to mitigate this charge is to make a payment to a personal pension scheme, which in turns reduces your net relevant income and therefore your liability to the charge.

Tax planning

“Child benefit higher income tax charge”

Worked example

The example below is based upon an individual receiving child benefit for three children in 2013/14, and with no other sources of income.

The £4,000 pension contribution receives further 20% basic rate tax relief so a total of £5,000 is actually paid into your pension pot.

Total gross payment to pension pot: £5,000

Reduction in net take home pay: £1,775

Saving:    £3,225 (64% tax relief)

To be able to include a pension contribution as a deduction against your income, the pension company must receive your pension contribution, i.e. funds cleared, by 5th April 2014. Alternatively, the same relief can be gained via a salary sacrifice arrangement and this could be considered when planning ahead to future tax periods.

As always, we are happy to help advise on these changes or explain them and relevant planning opportunities in further detail. If you are an existing client please speak to your regular contact.

We work very closely with two Independent Financial Advisors who can provide specific pension planning advice.  Please let us know if you would like their contact details.

If you are not a client and would like to arrange a free, non-obligation consultation on this or any other matter you feel that we may assist you on please call us on 01633 290745 or complete our contact form to arrange a visit.  To receive these newsletters direct to your inbox, please sign-up to our mailing list.


Without pension

With pension




Net pension payment



Income tax payable



Child benefit charge



Take home salary



Posted by: Lucy Thomas, 14 March 2014