Friday, 04 January 2013
With effect from 7th January 2012 the Government have introduced a High income Child Benefit charge. If you receive Child Benefit and you or your partner (if you have one) has an individual income of £50,000 or more, your tax could be affected.
Those individuals receiving between £50-60,000 will still receive Child Benefit but they will need to declare the amount by filling in a self assessment tax return each year. The charge will be 1% of the Child Benefit paid for every £100 of income between 50,000 and 60,000 and therefore will be less tax than the total amount of Child Benefit.
Your Child Benefit will not stop even if you earn over £60.000, however your tax will be altered to take into account the Child Benefit income. For those earning over £60,000 the new tax charge equals the amount of Child Benefit for the year.
both you and your partner have an individual income below £50,000 for a tax yearneither you or your partner are entitled - or have been entitled - to receive Child Benefit
keep your Child Benefit payments – you will have to declare the amount you or your partner are entitled to by filling in a tax return each year and registering for Self Assessment .tell the Child Benefit Office that you want to stop receiving Child Benefit payments – meaning you won't be liable for the new tax charge and won't need to fill in a tax return (unless you need to for other reasons) however please see below.
Your Child Benefit entitlement qualifies you for National Insurance Credits and ultimately a full state pension. If you decide to stop your Child Benefit payments, do remember to complete a Child Benefit application form if you have another child, even though you do not want the Child Benefit payment. This will then give you an entitlement to National Insurance Credits.
You can reduce your taxable income by making additional payments into a personal pension or by purchasing childcare vouchers. Both of these qualify for tax relief. If you are paying a lot for childcare then this may well be worth looking in to as it may reduce your high income child benefit charge.