The High Income Child Benefit charge will be introduced from 7 January 2013. You may be liable to this new tax charge if you, or your partner, have an individual income of more than £50,000 and one of you gets Child Benefit. It may also apply if someone else receives Child Benefit for a child who lives with you.
Who is affected by the High Income Child Benefit charge?
You will be affected by the High Income Child Benefit charge if during a tax year any of the following applies to you:
- you have an individual income of more than £50,000 and are entitled to received Child Benefit
- you have an individual income of more than £50,000 and live (or have lived) with a partner who’s entitled to receive Child Benefit
- both you and your partner have an income of more than £50,000 each per year, you have the higher income and one of you is entitled to receive Child Benefit
You will also be affected if during the tax year you have an individual income of more than £50,000 and both of the following apply:
- someone else is entitled to receive Child Benefit for a child who lives with you
- they’re entitled because they contribute at least an equivalent amount of Child Benefit towards the child’s upkeep, for example pocket money or clothes
It doesn’t matter if the child that is living with you is not your own child.
Your income will generally be your income before tax and deduction of ‘Personal Allowance’.
What to do if you’re affected
You will need to choose to do one of the following:
- keep receiving Child Benefit payments – but if you do you will need to declare the amount you or your partner are entitled to by filling in a tax return each year and registering for Self Assessment if you haven’t done so already
- tell the Child Benefit Office that you want to stop receiving Child Benefit payments – in which case you won’t be liable for the new tax charge and won’t need to fill in a tax return (unless you need to for other reasons)
Claiming Child Benefit
If you decide to stop your Child Benefit payments it won’t affect your entitlement to Child Benefit. As long as you, or your partner, are entitled to receive it you should still fill in a Child Benefit claim form if you have not already done so. This is because entitlement to Child Benefit:
- can help you qualify for National Insurance credits that can protect your entitlement to State Pension
- can help protect your entitlement to other benefits such as Guardian’s Allowance
- ensures your child is automatically issued with a National Insurance number before their 16th birthday
Changes in circumstances
Some changes can affect whether you are liable to the High Income Child Benefit charge, or how much you might have to pay. These can include when a partner moves in or leaves, changes in income or changes in your entitlement to receive Child Benefit.
If you would like any further advice on this matter and/or would like assistance in the future with the completion of a personal tax return, please do give me a call.
Sue Stephens, Personal Tax Consultant