HMRC have now released details on how the withdrawal of Child Benefit from 7 January 2013 will operate.
If you or your partner earns in excess of £50,000 this year, you will lose 1% of the Child Benefit you currently receive for every £100 of income above this limit. Once income reaches £60,000, the benefit is withdrawn completely.
HMRC are offering two alternatives for this clawback to be made:
* You can continue to receive the Child Benefit payments in the normal manner and pay a High Income Child Benefit Charge at the end of the tax year. This charge will be collected via the self assessment system operated by HMRC and you should disclose receipt of the Child Benefit on your tax return next year if this charge applies to you. If you do not usually complete tax returns, you will need to register with HMRC for self assessment by 6 October 2013 and complete a tax return online by 31 January 2014 to pay this charge.
* You can apply to stop the Child Benefit payments from 7 January 2013. This application must be made by the parent currently receiving the Child Benefit and can be made either online via HMRC’s website or by contacting the Child Benefit Helpline. This application must be made by 7 January 2013 at the latest.
If you apply to stop the payments this year and your income reduces next year to below the limit, then an application can be made to restart the payments. Again, this application can be made online or by telephone.
Providing that you registered for the benefit at the time your child was born, any stay at home parents will continue to receive the National Insurance credits for State Pension purposes even if you cease to receive the benefits.
It is vital that you register any further children that you have for this benefit, even if you are not entitled to the income, to ensure that they receive a national insurance number at age 16.
It is possible for you to preserve this allowance by reducing your income below the limit in a tax efficient manner. This is a complex area and if you would like any further guidance on this, please contact Karen Robinson (karenrobinson@cullenfp.co.uk).
