LETTERS DETAILING CHANGES to child benefit, due to come in next year, will be delivered to about one million families across the UK during November.
The higher income child benefit charge (HICBC), due to take effect from 7 January 2013, will see a charge of 1% on child benefit for every £100 of income between £50,000 and £60,000 earned by a taxpayer or their partner.
As a result, someone receiving £57,000 would pay 70% of their child benefit in tax, while someone on £60,000 would pay 100%. The charge will never exceed the value of the child benefit received.
Child benefit is usually paid to one parent for each child up to the age of 16, and certain others up to 19 at the rate of £20.30 per week for the eldest child and £13.40 for additional children. Alternatively, it may be paid at £1,056 annually for one child or £1,752 for two children.
The HICBC has to be paid through self-assessment, with those affected required to make a decision on whether to continue receiving child benefit or not pay the charge.
RSM Tenon national head of tax Paul Belsman predicted difficulty ahead for families affected, highlighting the need for effective communication if the tax is to prove successful.
"It is ambitious of the government to have commenced this on 1 January, with a clawback for a family of 3 children as much as £1,050 for just the current year," he said.
"Perhaps the answer is for some families who are struggling to work out what to do is to try to save as much as possible out of the benefit and look at the position at the end of the year. In that way, they will have a buffer.
"As ever, the mathematicians will show that those who fall in the band between £50,000 and £60,000 and have 3 children will suffer an effective marginal rate of tax of 66.49% tax (i.e. factoring in the clawback).
"The real issue is the need to file a self-assessment return; that is something HMRC should strive to simplify – otherwise, the burden becomes very troublesome."
Guidance has been published by HMRC, and can be read here.
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