Child Benefit in 2013 – your very own financial nightmare?
Over 1 million families will be caught by the Government’s new rules for retrospective means-testing of Child Benefit payments which come into effect on 7 January 2013.
The retrospective nature of the High Income Child Benefit Charge (HICBC) means that most of these families will have to repay some or all of the Child Benefit payments they have received. This throws up the very real prospect of having to repay money that you have already spent!
- If you or your partner earn over £50,000 but less than £60,000 a year (including income from all sources including dividends, interest and rents) then you should expect to have to repay some of your Child Benefit payments – more you earn, the more you repay.
- If you earn over £60,000 then expect to repay it all. For a family with 3 children this could mean an annual tax bill of almost £2,500.
- If your income is taxed under PAYE then HMRC may allow you to pay over 12 months by deduction from your future salary. Otherwise consider putting money aside if you would otherwise be unable to pay it back.
- You will also need to register with HMRC and complete a Self Assessment Tax Return giving full details of your income and including a calculation of your HICBC.
- Consider whether to ‘opt-out’ in advance and not receive any further Child Benefit payments. However you should take professional advice before doing this because, although you can potentially change your mind and ‘opt back in’ if your circumstances change (eg you lose your job), there are situations where you could be worse off.
- Consider ways to reduce your HICBC such as increasing pension contributions or Gift Aid payments, offsetting trading losses, or sacrificing salary for childcare vouchers.
This article was written by John Gale, an independent Chartered Tax Adviser with over 20 years’ experience advising people in relation to their tax affairs. For further information, or to find out about a free webinar, please contact John on firstname.lastname@example.org.