Posted: 12/11/12 by MOORE
Parents who earn more than £50,000 per year will soon have to make decisions in the face of changes to the Child Benefit system, warn tax experts at Moore Stephens Chartered Accountants.
Until now, parents of children under 18 years of age automatically received Child Benefit for each of their offspring while they were in full-time education, but from January next year that will change. In families where one parent earns more than £50,000 per tax year, the Child Benefit will be subject to a tax charge where 1% of the benefit will have to be repaid for each £100 of income the taxpayer receives between £50,000 and £60,000.
If income exceeds £60,000 then 100% of the benefit will be repaid. The new tax charge will apply week commencing on or after 7 January 2013 and is imposed on anyone who has claimed Child Benefit in the tax year or where anyone connected to the taxpayer, ie a spouse or partner of the taxpayer, has claimed. An anomaly in the rules means that in households where, for instance, both parents earn £49,999 the full Child Benefit will be paid, whereas in households where there is only one wage-earner but that person earns more than £60,000, no benefit will be received.
Pete Simons, a tax expert with Moore Stephens in Corby, said: “It is possible to opt out of Child Benefit so that no tax charge is made, but we wouldn’t recommend doing that where the claimant is not paying National Insurance, and may lose state pension benefits, or where there is a chance the taxpayer’s income may not remain above £60,000.
“In some cases, there may be opportunities for couple to equalise their combined income and reduce their exposure to the additional tax burden, so we recommend expert advice in this case.”
To find out more, contact Pete Simons at Moore Stephens Chartered Accountants, on 01536 461900, email firstname.lastname@example.org or make contact via @PhilipWalding on Twitter