It won’t have escaped your notice that there’s a new condition attached to the previously universal Child Benefit. If you’re a taxpayer earning more than £50,000 you’ll lose some or all of it. So should you claim it in the first place?
From 7th January 2013, if you’re a taxpayer earning more than £50,000 and you (or your partner)receive Child Benefit you will be affected by the change. You will still receive the benefit, as you’ll still be ‘eligible’ in some strange notional sense, but you’ll be required to pay some or all of it back through a new income tax charge.
The income tax charge
If you earn between £50,000 and £60,000, that tax charge will be 1% of the Child Benefit for every £100 above the £50,000. Earn more than £60,000 and you’ll pay back the full amount through the charge.
Paying the charge
If you already complete a tax return you’ll need to include details of your Child Benefit on the 2012-13 return. If you don’t already complete a return (and estimates suggest around half a million parents who don’t currently complete a self assessment will have to start doing so) you’ll have to register for self assessment no later than 5 October 2013 to avoid a penalty.
Stop or start?
Hundreds of thousands of parents have already made the decision to stop receiving payments. Yet registering for Child Benefit brings additional entitlements:
- It can help you or partner qualify for NI credits that can protect your State Pension
- It can protect other benefits such as Guardian’s Allowance; and
- Claiming Child Benefit ensures your child will receive a National Insurance number before their 16th birthday
If you’ve decided to stop payments you should still be entitled to these features as, technically speaking, you’re still claiming the benefit; you’re just not getting the money. But this is a distinction that could well be lost on new parents who may not claim at all.
So whether you intend to take the benefit and pay it back, or you decide to stop payments, our recommendation would be to claim your eligibility for Child Benefit.
For more, visit hmrc.gov.uk/childbenefitcharge