If the net taxable income for you or your spouse/partner was in excess of £50,000 last year, you will shortly receive a letter regarding your entitlement to or potential clawback of your child benefit claim.
From 7 January 2013, child benefit will be removed from all families with at least one earner over £60,000. Families with at least one earner over £50,000 will lose 1% of the child benefit for every £100 over this limit.
Net taxable income is defined as total income less losses, pension contributions and gift aid donations. Therefore, it is possible to make additional pension contributions and/or gift aid donations to preserve your child benefit each year.
The clawback is based on your taxable income for the current year (2012/2013) and will be collected via your tax return or PAYE calculation at the end of the year.
In practice, this could result in you receiving a hefty tax demand shortly after the end of the current tax year (5th April) to repay the child benefit you have incorrectly received. Depending upon the level of the liability arising, it may be possible to include this liability in your tax code for the following tax year.
You will also be given the option of declining to receive child benefit completely from 7 January to avoid the tax charge and the letter issued will detail how you can do this.
However, this is not the same as not making a claim for child benefit. It is important to make a claim for child benefit (even if you decline to receive it) as the claim can help entitlements to the state pension for a non-working parent, and ensures the child receives an NI number at age 15.
The Autumn Statement (due 5th December 2012) from the Government is expected to confirm the exact workings of this clawback.
In the meantime, if you have any queries, please contact Christine Wallwork on 0161 975 6723 or email firstname.lastname@example.org