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News - 1 October 2012

What you need to know about the child benefit charge on high income families

The new tax starts on 7 January 2013 and is expected to affect 1.2 million families

The child benefit charge on ‘high income’ families comes into effect for 2012/13, but only applies from 7 January, 2013. It is going to be levied on those in a household whose "adjusted net income" is more than £50,000 a year and who claim, or whose partner claims, child benefit.

The charge is the ‘appropriate percentage’ of the total child benefit received by both in the fiscal year. Where the adjusted net income is £60,000, the appropriate percentage is 100%.

As the charge is by reference to weeks, it will apply only to those weeks of a fiscal year for which a partnership exists. If the partnerships beaks up, the higher income partner will only be liable from 6 April until the week the partnership breaks up.

If child benefit is being paid, and a couple start living together, the charge will arise from the time the couple live together.

One of the major problems with this is the requirement for both partners to disclose their income. This caused a lot of difficulties prior to the introduction of separate assessment in 1990/91.

Tonmoy Kumar, Manager of the Accounts Department of ABDS comments:
“This runs counter to the general principle of taxpayer confidentiality, which has been a formal part of the income tax system since 1803.”

Another potential problem arises from the election not to receive child benefit. If a partner’s income is in excess of £60,000, it may be preferable to disclaim the benefit in order to avoid the charge. If the claimant decides to elect not to receive the benefit because the expected income is over £60,000 and the higher income partner finds that this is not the case, the claimant can revoke the election.

Child benefit should be claimed, normally when a child is born. This provides the entitlement to child benefit. Making the claim, even if the parents plan to elect not to receive the payments, is important if the parent wishes to obtain the National Insurance credits for state pension entitlement. It also guarantees that the child will be issued with a National Insurance number once they reach the age of around 15.

If you need any help and advice on Tax and the implications of Child Benefit , contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help

ABDS of Southampton For all of your Personal and Corporate Tax Planning.

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

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