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News - 20 December 2012

What will the changes to Child Benefit mean?

The new tax, which comes into effect from 7 January 2013, is an income tax charge to ensure that child benefit is effectively removed from persons with income in excess of £50,000.

It only applies if one person in a household partnership has an annual adjusted income in excess of £50,000. Thus, a single parent with income in excess of £50,000 is penalised, whereas if both parties were to receive £45,000 each, there would be no penalty.

Tonmoy Kumar, Manager of the Accounts Department of ABDS comments:
“The charge is based on the adjusted net income for 2012/13, so the final charge is not known until after the end of the year and is the ‘appropriate percentage’ of the total child benefit received by either partner in the fiscal year. Where the adjusted net income is £60,000, the appropriate percentage is 100%: and the total benefit is clawed back.”

Taxpayers are partners if:

  • they are a man and a woman who are married to each other and are neither separated under a court order, nor separated in circumstances where the separation is likely to be permanent
  • a couple, who are not married to each other but are living together as man and wife
  • the persons are two men, or two women, who are civil partners of each other and are neither separated under a court order, nor separated in circumstances in which the separation is likely to be permanent
  • the persons are two men, or two women, who are not civil partners of each other but are living together as if they were civil partners.

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

If a partnership breaks up the higher earning partner will only be liable from 6 April until the date the partnership breaks up.

One of the problems with this legislation is that both partners are required to disclose their income. This caused a lot of difficulties prior to the introduction of separate assessment in 1990/91 and many people would regard it as an intrusion into their privacy. The only way to avoid this would be to disclaim the child benefit.

If a partner’s income exceeds £60,000, it may be preferable to disclaim the benefit in order to avoid the charge. The election takes effect in relation to weeks beginning after the election is made. 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.

Stuart Coleman, Manager of the Tax Department of ABDS comments:
“Child benefit itself is not liable to tax and the amount that can be claimed is unaffected by the new charge. The charge is levied upon the member of the household with the highest income.”

Those liable to the charge will have to declare the liability on their tax returns. Now is the time to make sure that you have all the information to hand, particularly if you have not previously submitted a tax return.

HMRC estimates that this legislation will bring another 500,000 individuals within the self-assessment regime. Now is the time to get the paperwork in order.

Paper tax returns must have been submitted by 31 October 2013 and online returns by 31 January 2014.

If you are unsure and need any help and advice on Self Assessment or want the burden taken off your hands, contact the ABDS Tax Department Now.

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail:

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