By Iona Bain

Proposed cuts to child benefit could mean that parents on a higher rate of tax should be paying into their pension to bring down their earnings and maximise their income. 

The Treasury may be planning to cut off child benefits for every household with a higher rate taxpayer from April 2013, which represents a loss of more than £1,750 a year for a family with two eligible children. 

NFU Mutual estimates that 680,000 families could lose out as a result, including 180,000 families with just one earning parent.

The pensions provider now reckons that around 143,000 families paying 40% income tax could be better off (in terms of net income) if they paid more into their pension.

Sean McCann at NFU Mutual says: "Losing child benefit payments could make a big dent in many household incomes, but for many parents, putting a little more into the pension in order to bring down earnings below the higher rate threshold could help to make the most of their income."

He adds: "The tax efficiency of pension contributions could be key to these families from April 2013 but it's likely that, as ever, being tax savvy and taking financial advice will be as important this year as next."

Ministers hope that a bill which places a £26,000 cap on annual benefits for families will be steered through parliament.

The Welfare Reform Bill will be debated in the House of Lords today, with some peers pushing for child benefit to be excluded from the cap.