HMRC are starting to send out letters to tax payers it believes earning in excess of £50,000 per year and are in receipt of Child Benefit. These individuals may be subject to the High Income Child Benefit charge, a mechanism designed to clawback the Child Benefit from high earners and which will be introduced from 7 January 2013.
Where there is more than one person in a household with income over £50,000, the charge applies to the person whose income is higher. This may not be a natural parent of the children, and the couple may not be married. For these purposes income includes all sources of taxable income, not just earnings. There is a calculator on the HMRC website to help people work out what their individual income is.
The first tax return affected will be for the current year, 2012/13, and will only have to show a HICBC for CB received after 7 January 2013. It will be payable by 31 January 2014.
There are options open to those taxpayers to reduce their income for the tax year, for example by increasing pension payments, but these need to be evaluated on a case by case basis.
For more information contact Jamie Hooper on 01206 768538.
*rate based on a family of eight children, where the charge would be £59.33 per additional £100, which when added to the income tax and NIC rates equates to a marginal rate of tax of 101.3%