On the 7th January 2013 there is a fundamental change that will affect any taxpayer earning more than £50,000, who is also in receipt of Child Benefit. The change also comes into play if their partner receives Child Benefit.
The change is the effective means testing of child benefit that has been highly publicised, eith all of its peculiarities and apparent income disparity.
Those caught will be liable to incur a new income tax charge. The amount is equivalent to some or all of the Child Benefit that they or their partner receive.
HMRC will shortly write to taxpayers who are likely to have income over £50,000 to explain the changes and tell them what they need to do if they are affected. Those who pay income tax via PAYE can choose to have the underpayment for 2012-13 and their ongoing in-year liability collected through their tax code in 2014-15. However, they must still complete a Self Assessment return.
For those with income between £50,000 and £60,000, the tax charge will be 1% of the Child Benefit for every £100 above the £50,000. Those with income above £60,000 will be charged the full amount of the Child Benefit and might wish to stop receiving Child Benefit payments.
If customers choose to keep receiving the Child Benefit payments they will need to declare the amount which they or their partner are entitled to receive through Self Assessment and filling in a tax return each year. For those that aren't already registered to complete a tax return it is another level of red tape and potential cost.
So far we find that many of our higher paid employees are simply opting out of the scheme to avoid the extra administration involved
To find out more you can visit www.hmrc.gov.uk/childbenefitcharge
