The high income child benefit charge which came into effect on 7th January 2013 maybe a key consideration whilst gathering the information necessary to prepare your tax return for the year ended 5th April 2013.
How does it work?
Individuals (or their partners) whose income lies between £50,000 and £60,000, will be subject to a 1% charge for every £100 awarded through Child Benefit. If you or your partner’s total income exceeds the upper limit of £60,000, the charge imposed will be equal to the amount of child benefit you received or were entitled to during the year. The high income child benefit charge will rest with the person who has the highest income for the year (who may not necessarily be the claimant). The charge will be treated as an additional tax liability for the tax year in which it was received and collected through self assessment.
If you do not wish to pay the new high income child benefit charge, it is possible for the individual currently entitled/claiming child benefit to elect not to receive it. This election can be revoked at a later stage if your circumstances change or you wish to claim child benefit in the future.
As this came into effect on 7th January 2013, the charge will be apportioned for part of the 2012/13 tax year. Going forward the amount of the charge will be equal to the full amount of benefit received by you or your partner during the year.
Clients are therefore encouraged to keep careful records of the amounts which they receive as child benefit as they will be required when completing their tax returns.
The information in this article is believed to be factually correct at the time of writing and publication, but is not intended to constitute advice. No liability is accepted for any loss howsoever arising as a result of the contents of this article. Specific advice should be sought before entering into, or refraining from entering into any transaction.