9 November 2012

High Income Child Benefit Charge

During November, HMRC will send around 1 million letters, with an information leaflet, to people who are likely to be affected by the changes to Child Benefit for high income families. The new High Income Child Benefit Charge takes effect from 7 January 2013 and will apply when a taxpayer’s or their partner’s annual income is more than £50000 and they or their partner receive Child Benefit. 

For those with income between £50000 and £60000, the charge is gradually increased to 100% of the Child Benefit payments and for people whose income is more than £60000, the new tax charge is 100% of the amount of Child Benefit. 

Anyone affected should read the information carefully and will need to decide whether to keep receiving Child Benefit, in which case the new tax charge will have to be paid via self-assessment tax return, or whether to stop receiving Child Benefit payments instead of paying the new tax charge. If income is less than £60000, the tax charge will always be less than the amount of Child Benefit so people could lose out if they just opt to stop receiving Child Benefit. 

Anyone affected can still claim Child Benefit, as underlying entitlement (even though payments stop) can help protect entitlement to State Pension and other benefits such as Guardian’s Allowance. It also ensures the child is automatically issued with a UK National Insurance number as they reach 16. 

More information and guidance about what steps to take is available at http://www.hmrc.gov.uk/childbenefitcharge. There is also a calculator tool to help people estimate the amount of their new tax charge at Gov.UK https://www.gov.uk/child-benefit-tax-calculator .

 

A copy of the HMRC letter can be found here and the information leaflet can be found here