economy
Families with One Earner Told 'Use £2,880 Rule' to Avoid Pensions Raid
Families which only have one earner have been given vital financial advice and highlighted a £2,880 rule. Some have complained that current rules around tax and finance unfairly penalize single-income families, where, for example, one parent might have given up work after having children.
TL;DR
- UK tax and benefit rules can unfairly penalize single-income families by assessing individuals rather than total household income.
- The High Income Child Benefit Charge is levied on individual earners over £60,000, not total family income.
- Splitting income between two earners allows for the utilization of two separate tax-free Personal Allowances, resulting in a lower overall tax bill.
- A non-earning partner can contribute £2,880 to their pension, with government tax relief making it £3,600.
- Spouses can transfer £20,000 to their partner's ISA annually, utilizing both their £20,000 allowances.
- Investing in the name of the stay-at-home parent can be more tax-efficient due to basic rate taxation and the full personal allowance.