Best of the Week
Most Popular
1.Bitcoin War Begins – Bitcoin Cash Rises 50% While Bitcoin Drops $1,000 In 24 Hours - Jeff_Berwick
2.Fragile Stock Market Bull in a China Shop -James_Quinn
3.Sheffield Leafy Suburbs Tree Felling's Triggering House Prices CRASH! - Nadeem_Walayat
4.Bank of England Hikes UK Interest Rates 100%, Reversing BREXIT PANIC Cut! - Nadeem_Walayat
5.Government Finances and Gold - Cautionary Tale told in Four Charts - Michael_J_Kosares
6.Gold Stocks Winter Rally - Zeal_LLC
7.The Stock Market- From Here to Infinity? - Plunger
8.Ethereum (ETH/USD) – bullish breakout of large symmetrical triangle looks to be getting closer - MarketsToday
9.Electronic Gold: The Deep State’s Corrupt Threat to Human Prosperity and Freedom - Stewart_Dougherty
10.Finally, The Fall Of The House Of Saud - Jim_Willie_CB
Last 7 days
Stock Market More Correction Ahead? - 19th Nov 17
Universal Credits Christmas Scrooge Nightmare for Weekly Pay Recipients - 18th Nov 17
Perspective on the Gold/Oil Ratio, Macro Fundamentals and a Gold Sector Bottom - 18th Nov 17
Facebook Traders: Tech Giant + Technical Analysis = Thumbs Up - 18th Nov 17
Games Betting System For NCAA Basketball Sports Betting - Know Your Betting Limits - 18th Nov 17
Universal Credit Doomsday for Tax Credits Cash ISA Savers, Here's What to Do - 18th Nov 17
Gold Mining Stocks Fundamentals Q3 2017 - 17th Nov 17
The Social Security Inflation Lag Calendar - Partial Indexing - 17th Nov 17
Mystery of Inflation and Gold - 17th Nov 17
Stock Market Ready To Pull The Rug Out From Under You! - 17th Nov 17
Crude Oil – Gold Link in November 2017 - 17th Nov 17
Play Free Online Games and Save Money Free Virtual Online Games - 17th Nov 17
Stock Market Crash Omens & Predictions: Another Day Another Lie - 16th Nov 17
Deepening Crisis In Hyper-inflationary Venezuela and Zimbabwe - 16th Nov 17
Announcing Free Trader's Workshop: Battle-Tested Tools to Boost Your Trading Confidence - 16th Nov 17
Instructions to Stop a Dispossession Home Sale and How to Purchase Astutely at Abandonment Home - 16th Nov 17
Trump’s Asia Tour: From Old Conflicts to New Prospects - 16th Nov 17
Bonds And Stocks Will Crash Together In The Next Crisis (Meanwhile, Bond Yields Are Going Up) - 16th Nov 17
A Generational Reset That Will Redistribute Wealth to the Bottom 60% Is Near - 16th Nov 17
Ethereum (ETH/USD) – bullish breakout of large symmetrical triangle looks to be getting closer - 16th Nov 17
Gold’s Long-term Analogies - 16th Nov 17
Does Stripping Streets of ALL of their Trees Impact House Prices (Sheffield Example)? - 15th Nov 17
The Trump Administration’s IP Battle Against China - 15th Nov 17
5 Ways Bitcoin can Improve its Odds of Becoming the Future of Money - 15th Nov 17
These Headlines Say Gold is Building a Base for Something Big - 15th Nov 17
Protect Your Savings With Gold: ECB Propose End To Deposit Protection - 14th Nov 17
Gold on the Ledge, Trend Forecast - 14th Nov 17
The Unbearable Slowness Of Fourth Turnings - 14th Nov 17
Silver Sign’s Confirmation & More - 14th Nov 17
Could This Be The End for Tesla? - 14th Nov 17
Harry Dent’s Fourth Cycle: More Evidence of Stock Market Downturn - 14th Nov 17
Why Having Good Credit Is Important If You Want to Invest - 14th Nov 17
The Bitcoin Bubble Explained in 4 Charts - 13th Nov 17
How the US Has Secretly Subsidized China to Produce Eco-Unfriendly Solar Panels - 13th Nov 17
The Increasingly Unstable Middle East Must Be On Every Investor’s Radar - 13th Nov 17
Stock Market Critical Supports are Being Challenged - 13th Nov 17
The One Chart All Investors Should See Before 2018 - 13th Nov 17
Short-Term Stock Market Uncertainty Following Recent Rally, Will Stocks Continue Higher? - 13th Nov 17
Is Hillary Just the “Fall Guy” for the Intel Agencies and their Moneybags Bosses? - 12th Nov 17
Stock Market Correction Phase - 12th Nov 17
Finally, The Fall Of The House Of Saud - 12th Nov 17

Market Oracle FREE Newsletter

Traders Workshop

How 40% Tax Payer Families Can Keep Child Benefit Using Pensions

Personal_Finance / Taxes Oct 07, 2010 - 06:10 AM GMT

By: Nadeem_Walayat

Personal_Finance

Firstly, virtually all of the mainstream press are WRONG in the assumption that the 40% tax band kicks in next tax year from £44,000 because they have failed to take into account tax changes announced in the June emergency budget that in effect reduces the higher rate tax band towards a rate of approx £42,500 (pending release of September RPI later this month).


Therefore those earning £42,500 to £44,000 have been given FALSE assurances by the mainstream press that includes the Financial Times, Guradian Telegraph, Daily Mail, Times and the rest because from 1st April 2011 they will have been moved into the higher rate tax bracket as I explain below.

The Coalition government as part of the Liberal Democrats manifesto promise for raising the basic tax free allowance towards £10,000 announced in the June emergency budget that the tax free allowance will rise to £7,475 from April 2011 which will cost £3.5 billion. However this tax cut has been clawed back from those earning over £44k by means of lowering the threshold for higher rate tax payers which means that the higher 40% tax rate kicks in at a lower rate of approx £1,500 against that for 2010-2011 so as to negate the impact of the increased tax free allowance.

How to avoid the Child Benefit Time Bomb

By increasing ones contribution to ones personal pension to reduce the taxed income in the current tax year to below the 40% tax band.

i.e. £45,000 current gross taxable income

Personal £2,000 net contribution into a personal pension

HMRC Higher rate tax contribution £800 (40%)

Total pension contribution £2,800

Therefore the tax payer is no longer taxed at the higher rate for the current tax year i.e. registering as £42,200, BELOW the 40% tax bracket, therefore higher rate tax payers should get to keep their Child Benefit, this many can achieve a higher net pay (including CB) WITH extra pensions contribution.

The validity of the above tax bracket reducing procedure as well as others such as childcare vouchers will become clearer once the Coalition government has finished announcing all of its tax and benefit changes ahead of the 2011-12 tax year, so I will come back to this topic in depth in a few months time.

Comments and Source : http://www.marketoracle.co.uk/Article23312.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-10 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 24 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market and he is the author of the NEW Inflation Mega-Trend ebook that can be downloaded for Free. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

jonnysingapore
08 Oct 10, 20:21
top rate taxpayers

Nadeem - the median income for a top tax rate payer is apparently £75K, so many would be caught so I disagree with your synopsis though no doubt there are marginal cases, but bear in mind:

1. This is instead of raising income tax from 40% (cowardly politics).

2. Its not for 3 years, so its a bit lame really.

3. May not last into the next parliament.

4. £1million IHT threshold is going to get introduced by the tories once the deficit is close to being addressed, so these higher rate taxpayers' families will get a huge windfall as a trade off.

Can't wait for your analysis of the to be announced cuts with respect to the effect on the economy.


Nadeem_Walayat
08 Oct 10, 20:36
cuts impact

Hi

I analysed the impact of the cuts on the UK economy a couple of months ago - 09 Aug 2010 - UK Economy GDP Growth Forecast 2010 to 2015

And yes it is not for 3 years, which makes me suspect that it will not be implemented.

Best

NW


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife