From 7 January 2013 for parents that earn over £50,000, you will not be entitled to all of the child benefit and will have to pay a tax charge each year.
Child benefit is paid for each child up to age 16, or age 20 and in full time education.
You’ll get £20.70 per week for your first child and then £13.70 a week for any further children.
Click on HM Revenue & Customs (HMRC) site here to make an application. If you are a high earner (earn over £60,000), you can opt out, as you are not entitled to it.
New rules from January 2013
From 7 January 2013 not all families will be able to claim for child benefit.
For those earning more than £50,000 and already getting child benefit, then although it will not stop, you will be subject to what HMRC are calling the high income child benefit charge – this means you will have to pay additional tax to make up for the benefit. The tax will have to be paid using self-assessment.
If you have never filled in a self-assessment form before, you may have to now if you are in the higher income bracket.
It is estimated that 500,000 more people will be subject to self-assessment – good news for accountants but bad news for parents.
The rules are not simple, by any means – but the points below will help answer some questions:
- You can get the full allowance as long as you or your partner do not earn over £50,000 a year
- If either you or your partner earn over £50,000 a year, then you will still get the benefit, but a reduced amount. This reduction is reflected in the highest earner having to pay an additional 1% tax on every £100 earned over £50,000. So, if you or your partner earn £52,000 a year, then the £2,000 will be subject to the additional tax
- This tax will be paid via a self-assessment tax return at the end of the tax year
- Combined or household income is not taken into account – as an example, if Mr Smith earns £52,000 and Mrs Smith earns £10,000 a year – then the child benefit will be reduced. However, should Mr Smith be on £45,000 a year and Mrs Smith on £40,000 a year – then the child benefit is not affected, even though scenario two means the family has more income
- If either parent earns over £60,000, then you get no child benefit at all
- HMRC has sent out letters to families that maybe affected
- If you fall under the higher income bracket of between £50,000 to £60,000, then it is possible to stop to payments, but it is worth knowing that the tax charge will be lower than the actual child benefit, so you may not want to stop payments
- If you or your partner earn more than £60,000, then the tax charge will be the same as the child benefit, so in this case, you may want to stop payment. You can do this on the HMRC site here
- If you are not already making use of a salary sacrifice schemes, such as childcare vouchers, then it may be worth considering as it could reduce your income below the threshold which could see you keep your child benefit as it is.