News: December 2012
Child benefit charge letters
Child Benefit is to be withdrawn gradually in situations where one parent or partner earns more than £50,000 a year, and withdrawn entirely in cases where this figure is more than £60,000. You should note that the draft legislation has been amended, providing a safety net for households expecting the higher income partner to earn more than £60,000 (and consequently electing to waive child benefit), only to find that this income turns out to be between £50,000 and £60,000. In situations such as these, a claim for child benefit can still be made.
Our advice on this important topic can be tailored to meet your specific circumstances:
- Talk to your partner about how the new rules could affect the family’s finances, as they may not know about this new rule.
- Speak to your partner about their income. You need to know if theirs is more than £50,000 and, if so, which of you earns the most. It may be better to sacrifice some of the higher salary to avoid the clawback of the child benefit charge.
- The letter from HMRC asks how much ‘individual income’ a recipient of the benefit or their partner may earn. Importantly, this does not just include salary. Dividends, income from rental properties including holiday homes, self-employed earnings, interest on savings and pensions all need to be taken into account. Also consider whether any Gift Aid payments have been made to charities, or whether pension contributions have been made – these can be deducted when determining the final figure.
- For those partners who do not or cannot discuss their respective incomes with each other, there will be help from HMRC. It will try to provide the minimum amount of information necessary for someone to establish whether they or their partner has the higher income. Check with HMRC how up to date the information they have is.
- Take into consideration contract work and possible forthcoming projects affecting your income – does this take you or your partner further over the threshold?