Changes in Child Benefit.
One million households affected by new Child Benefit rules that will cut the amount they are entitled to receive are to be sent letters by HMRC next month.
Households in which an individual’s income exceeds more than £50,000 and who claim Child Benefit – the individual or the partner – will be affected by a new tax charge that takes effect from 7 January 2013.
Those liable to pay the new high income child benefit charge (HICBC)can either continue receiving Child Benefit and pay the charge through self-assessment , or choose to stop receiving the benefit altogether.
Around 50,000 parents are expected to be affected by the tax charge.
The tax charge will be one per cent of the Child Benefit paid for every £100 of income between £50,000 and £60,000.
Although the tax charge will be less than the total amount of Child Benefit, those earning £60,000 or more will have the benefit withdrawn completely.
Child Benefit currently stands at £20.30 a week for the first child and £13.40 for each child after that. Given these figures families with three children and at least one parent earning over £60,000 will lose out on around £2,450 a year.
As reported in the press, a HMRC spokesperson said: “The unprecedented scale of the deficit has meant that the government has had to make tough choices to reduce public spending.
“In a period when the government is having to reduce welfare spending, it is very difficult to justify continuing to pay for the child benefit of the wealthiest 15% of families in society.”
The Government has also clarified the rules surrounding the charge, making it easier for those to reverse their decision to opt out should their income unexpectedly fall between £50,000 and £60,000.
Although not that many people are affected these changes will further complicate self assessment rather than simplifying it.
It also means that for some households’ careful forward planning can mitigate if not nullify the additional tax charge.
For further advice on how these changes impact you contact us on 0845 365 1000.
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