Million families face child benefit shake-up

by Calum Fuller

More from this author

30 Oct 2012

  • Comments
HM Revenue and Customs

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.

Visitor comments

blog comments powered by Disqus
display:none

Add your comment

We won't publish your address


By submitting a comment you agree to abide by our Terms & Conditions

Your comment will be moderated before publication

Submit
  • Send

Appointments to University Committees

University of Glasgow 120x60University of Glasgow - Glasgow - unremunerated positions

 

 

Newsletters

Get the latest financial news sent directly to your inbox

  • Best Practice
  • Business
  • Daily Newsletter
  • Essentials

Careers

Search for jobs
Click to search our database of all the latest accountancy roles

Create a profile
Click to set up your profile and let the best recruiters find you

Jobs by email
Sign up to receive regular updates with the latest roles suitable for you

Briefings

budget-management

Why budgeting fails: One management system is not enough

If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.

cchcover

iXBRL: Taking stock. Looking forward

In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.