Income tax: Britons pushed into higher brackets amid inflation – how to lower payments | Personal Finance | Finance

The value of regular pay is falling at its fastest rate in a decade, despite pay growing at 4.2 percent or 6.8 percent (include bonuses), according to latest ONS figures. Unfortunately, unlike inflation, income tax thresholds are frozen until 2026 and more people are being pushed into higher income tax brackets.

If a pay rise has pushed someone into the next tax bracket, it doesn’t just mean paying more income tax, but as a parent it may affect some child benefit.

On BBC Money Box, Kay Ingram, chartered financial planner, explained the “two main things” people can do to lower their payments.

She said people can make additional pension savings or gifts to charity.

Ms Ingram explained that their additional benefits for all tax payers.

READ MORE: Premium Bonds: NS&I announces two new jackpot winners – have you won £1million?

Saving into pensions or making charitable donations can reduce the amount of income tax the one pays.

Every pound paid into a pension is not taxable income so people can get relief not their contributions on the highest rate of tax someone pays, she said.

Ms Ingram said: “If you are able to reduce your income below £50,270, it can double the amount of savings interest you can receive tax free from £500 a year to over £1,000.”

Ryan, also explained his situation with his child benefit payments on the podcast.

DON’T MISS 

“That includes pension savings which the individual makes personally to a personal pension or a stake holder plan, and also contributions made to some work place pension schemes.

“Same applies to charitable donations made under the gift aid scheme. These all reduce the income of the individual and therefore can enable them to restore or increase the amount of child benefit they can receive tax free.”

Ms Ingram urged those who are just over the threshold to keep claiming child benefit.

She explained that as a progressive charge, people won’t stop getting the payment just because they go into a new tax bracket completely.

She said: “For every £100 over £50,000, the child benefit is taxed at one percent, so it’s only once you’re over £60,000, that you’ll actually be paying 100 percent tax on it.

“Even at that level, if you make substantial pension contributions or gift aid you reduce your income and get some or all of the child benefit back, tax free.”