C & GB Associates | Accountants, tax planning and business start-up specialists

Search
Go to content

Main menu

- Child Benefit changes - Q&As

Published by Guy Baragwanath in Child Benefit · 14/1/2013 16:35:07
Tags: childbenefittaxreturnhighincomechildbenefitcharge

Changes to the rules on child benefit which came into force recently will reduce the entitlement for over 1 million families.

Questions covered below are:
-  
What is Child Benefit?
-  How much can you receive from Child Benefit?
-  What are the new Child Benefit eligibility rules?
-  What happens if I need to repay Child Benefit?
-  Should I stop receiving Child Benefit if the highest earner earns between £50,000 and £60,000?
-  Should I stop receiving Child Benefit if the highest earner earns over £60,000?
-  Where can I check my likely tax charge if my income is more than £50,000?
-  What happens if I decide to stop receiving Child Benefit?
-  What happens if I decide to keep receiving Child Benefit if the highest earner earns above £50,000?
-  How can I find out if my partner claims Child Benefit?

- What is Child Benefit?

Child Benefit is a tax-free payment that is aimed at helping parents with the cost of bringing up children. One parent is able to claim for Child Benefit and the system is administered by HMRC.


- How much can you receive from Child Benefit?

Child Benefit is currently paid at the rate of £20.30 a week for the first child and then £13.40 a week for each child after that.
Child Benefit lasts until each child reaches 16 (or 18) if they are still in full-time education, and in some cases until they are 20.


- What are the new Child Benefit eligibility rules?

The new eligibility rules are based on the highest earning parent of the family.

Under £50,000            all Child Benefit is still received
£50,000 to £60,000     Child Benefit reduced based on income (1% per £100 over £50,000)
Over £60,000             Child Benefit lost altogether.

One irregularity with the new rules has angered many families. This is when both parents earn under the £50,000 limit, but their joint income is over the threshold. When this occurs, there is no reduction or loss of Child Benefit.

An example to highlight this irregularity can be seen where a family with both parents earning £49,000 (giving a total income of £98,000) still receives the full Child Benefit, as neither parent earns over the threshold. Compare this to a family who has one income of £52,000 and will see some of their Child Benefit having to be repaid because this one income is over the threshold.


- What happens if I need to repay Child Benefit?

If you have not opted out of receiving Child Benefit, the highest earner will be taxed by HMRC and this person will need to complete a self-assessment tax return. HMRC sees this additional tax as the "High Income Child Benefit Charge". The amount paid will be based on the amount of Child Benefit received and your taxable income.

Income between £50,000 and £60,000  Tax charge is 1% of Child Benefit per
                                                        £100 over £50,000 income
Income over £60,000                         Tax charge is 100% of Child Benefit


- Should I stop receiving Child Benefit if the highest earner earns between £50,000 and £60,000?

If you or your partner’s individual income is between £50,000 and £60,000 you might not want to stop receiving Child Benefit payments.
This is because although some Child Benefit will need to be repaid back through self-assessment, you will still receive a proportion of the Child Benefit (the tax charge will be lower than the amount of Child Benefit received).


- Should I stop receiving Child Benefit if the highest earner earns over £60,000?

If you or your partner’s individual income is over £60,000, the tax charge will always be the same as the amount of Child Benefit received so you may want to stop the payments.

However, some income adjustments may apply which could bring your income level below the £60,000 limit (examples include pension contributions, trading losses from self-employment and Gift Aid etc) it may be beneficial to continue receiving child benefit and pay the additional tax through your self-assessment tax return.


- Where can I check my likely tax charge if my income is more than £50,000?

You can visit
https://www.gov.uk/child-benefit-tax-calculator to check the likely tax charge.


- What happens if I decide to stop receiving Child Benefit?

If you decide to stop you Child Benefit payments it will not affect your entitlement to Child Benefit. You should still complete a Child Benefit claim form each year. Entitlement to Child Benefit allows you to:

    - qualify for National Insurance credits to protect your entitlement to State Pension;
    - protect your entitlement to other benefits such as Guardians’ Allowance;
    - ensures your child is automatically issued with a National Insurance number before their 16th birthday.

Only the person who receives the Child Benefit is able to stop the payment. You are able to stop your payments at any time.
You will not be able to stop your payments if you are paying back on overpayment of Child Benefit from your current Child Benefits payment.

If you inform HMRC after 7 January 2013 during the 2012-13 tax year (6 April 2012 to 5 April 2013) that you want to stop receiving Child Benefit, the highest earner will be liable to the tax charge on any entitlement from 7 January 2013 up to the date the payments stop.

In following tax years, if you stop receiving Child Benefit at some time during that tax year, the highest earner will be liable to the tax charge from the start of the tax year (6 April) up to the date the payments stop.

You can stop your Child Benefit payments by completing an online form here http://www.hmrc.gov.uk/childbenefitcharge/stopchbpayments.htm or by contacting the Child Benefit Helpline on 0845 302 1444.


- What happens if I decide to keep receiving Child Benefit if the highest earner earns above £50,000?

If you do not want to stop receiving payments, then whoever is liable to the tax charge will have to register for self-assessment and complete a tax return. This individual will then need to pay the tax charge based on the amount of Child Benefit entitlement.

To register for self-assessment, you will need to complete the following form
http://www.hmrc.gov.uk/sa/forms/sa1.pdf


- How can I find out if my partner claims Child Benefit?

The high earner will need to know whether their partner is claiming child benefit when they have income of more than £50,000 as they will be responsible for any tax due. HMRC says it will "expect" couples to give each other basic financial details to see if they must be taxed.

HMRC will provide basic information from its records for taxpayers to see whether or not their partners receive child benefit, or have an "adjusted net income" above £50,000 and should be paying the new tax.


If you would like more information about Child Benefit or you would like us to complete your self-assessment tax return if you are now required to complete one, please contact us.

C & GB Associates - Accountants
8-10 Millgate, Thirsk, North Yorkshire, YO7 1AA
Tel & Fax: 01845 525502
Email:      mail@cgb-associates.com
www.cgb-associates.com




- Outstanding VAT Returns will mean HMRC will look at all tax affairs more closely

Published by Guy Baragwanath in Latest VAT News · 10/1/2013 12:21:29
Tags: VAToutstandingreturnVAT
HMRC are launching a new VAT Outstanding Return campaign from March 2013 for businesses with late VAT returns or late VAT payments. All tax affairs will be looked at more closely if VAT is not up to date.
C&GB Associates on LinkedIn
Payroll services for schools and academies
Back to content | Back to main menu