Child benefit cuts – new to self assessment?

October 29th, 2012  |  Published in Uncategorized

One million households will receive letters from HMRC this week about losing child benefit, the BBC reports.

Instead of simply denying the benefit to those affected, ministers have decided that the money will still be paid, then clawed back through a “tax charge” imposed on parents’ earnings.

From 7 January 2013, if one person in a household earns over £50,000, the benefit will be reduced or stopped altogether, on a sliding scale up to £60,000. As a result of these changes, thousands of taxpayers will be required to submit self assessment tax returns for the first time. We can make this relatively painless, submitting your returns online for you.

The changes will produce anomalies, such as in the case of two-earner households where both parents earn £49,000 – they will keep their benefits, where a family where one taxpayer earns £60,000 and the other nothing, will lose all their child benefit. If tax planning is possible by changing the share of income, or increasing pension contributions, again, we would be happy to discuss the situation with you.

Currently, one parent can claim £20.30 a week for an eldest or only child and £13.40 a week for each of their other children. The payments apply to all children aged under 16 and in some cases until they are 20 years old.

HMRC says it will “expect” couples to give each other basic financial details to see if they must be taxed. HMRC will also let taxpayers ask for rudimentary information from its records to see whether or not their partners receive child benefit, or have an “adjusted net income” above £50,000 – this runs counter to the principles of taxpayer confidentiality, and separate taxation of married couples, but HMRC seem happy that they have the powers to cope.   Where a couple has split up, generally the one with whom the child lives is the one who can claim the benefit. However if the other partner is paying towards the upkeep of a child, and the payment is at least the amount of the child benefit, they can apply to receive it if the other partner is not claiming.

Again, if an approach to HMRC, or a partner who you are no longer speaking to is necessary, we can help.





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