Shropshire tax advisor’s counsel on child benefit changes
A local tax specialist is advising parents across the region of the impending child benefit reforms due to be introduced early next year, and the potential implications of these for individuals and their families.
Fiona Green, Taxation Director at Shrewsbury-based DJH Accountants, is urging tax payers to review their individual circumstances in light of a high income tax charge due to take effect from January 2013, which will see parents means tested to establish their eligibility to continue to receive the allowance. This follows official inclusion of the reform in the Finance Bill 2012 which received Royal Assent last month, and which will now see it become UK law.
Child benefit, formerly known as family allowance, is currently worth £20.30 per week for a first child and £13.40 per week for subsequent children, regardless of an individual’s or family’s earnings. The changes being introduced by the Conservative-Liberal Democrat Coalition will see this benefit withdrawn or reduced from households containing a higher-rate taxpayer, with individuals earning over £60,000 per year having the benefit taken away completely, and those earning between £50,000 and £60,000 losing a proportion, having to pay it back through the income tax system.
Fiona commented: “The changes to the child benefit system are relatively straightforward in that individuals earning over £50,000 will receive less than those earning below this threshold, but the way in which the changes are to be implemented is slightly less clear cut. For example, those on higher incomes will still receive the full amount of child benefit, however they will be subject to a repayment of this at a rate of 1% for every £100 they earn over the threshold via PAYE and self-assessment tax.
“The changes also mean that child benefit will be withdrawn from a family where an individual in a couple is a higher-rate taxpayer, regardless of the joint income of that couple. So, a couple who each earn £49,000 a year will still be entitled to the full benefit, while families with just one earner taking home more than £60,000 will get nothing. The changes also mean that parents who receive a small pay rise placing them above the higher-rate income tax threshold might actually find themselves considerably worse off than they were before. In this case, some individuals may be encouraged to stop claiming child benefit altogether to avoid paying the additional tax charge.
“Those who currently claim child benefit don’t have to do anything yet, as HMRC will issue letters to all those affected later this year, however it’s certainly worth people being aware of the changes due to be introduced and how these changes could impact on them and their families. For anyone wanting to find out more about these reforms and their potential impact, I’d urge them to get in touch on 01782 710101 or email me at fionagreen@djh.co.uk.”
