Decision whether to opt out may be difficult for those who have a fluctuating income or do not know which partner has the higher income, says CIOT
HMRC has reminded families who may be liable to the new high income child benefit charge (HICBC) that they have until 6 January to decide whether to stop receiving child benefit.
‘Anyone wishing to opt out of receiving child benefit for 2012/13 must do so before 7 January,’ the Chartered Institute of Taxation said in a press release on 21 December.
‘Opting out of receiving child benefit after 7 January will still leave a 2012/13 HICBC, based on the child benefit received after that date. The HICBC equals 1% of the child benefit paid for every £100 of income between £50,000 and £60,000.’
The charge will be payable ‘if a taxpayer, or their partner, has income of more than £50,000 for the tax year and one of them is entitled to receive child benefit’.
Over 155,000 people have already decided to stop receiving the benefit, said Lin Homer, HMRC’s chief executive.
HMRC said: ‘For those with income of more than £60,000, the tax charge is 100% of the amount of child benefit. For income between £50,000 and £60,000, the charge is gradually increased to 100% of the child benefit. Those affected will need to decide whether to keep receiving child benefit and pay the tax charge through self-assessment, or to stop receiving child benefit and not pay the new charge.
‘If a couple wish to stop receiving the benefit, the child benefit recipient should contact HMRC before the new charge starts on 7 January. If their income is less than £60,000, the tax charge will always be less than the amount of child benefit, so they could lose money to which they are entitled if they choose to stop receiving child benefit.’
Complex
Tina Riches, technical director at the CIOT, said: 'It is the [child benefit] claimant who has to take the decision. Each of the choices has pros and cons. For those who expect to have income between £50,000 and £60,000, the new tax charge will be less than the child benefit, so the household will usually be better off if the child benefit claimant continues to receive the child benefit and the higher income partner pays the HICBC.
‘If you are reasonably sure that your income for the year will be over £60,000, the claimant may want to opt out of receiving the child benefit, as the HICBC would wipe out the benefit received. You will then not face an unpleasant HICBC bill and avoid going into self-assessment (SA) if you are not already in SA.’
Riches added: ‘The situation will be particularly complex for those with fluctuating income or who gain or lose a partner or who don’t know which partner has the higher income. And, of course, for HMRC, who have to administer it all! The new charge is expected to require the equivalent of 450 full-time HMRC staff.’
Decision whether to opt out may be difficult for those who have a fluctuating income or do not know which partner has the higher income, says CIOT
HMRC has reminded families who may be liable to the new high income child benefit charge (HICBC) that they have until 6 January to decide whether to stop receiving child benefit.
‘Anyone wishing to opt out of receiving child benefit for 2012/13 must do so before 7 January,’ the Chartered Institute of Taxation said in a press release on 21 December.
‘Opting out of receiving child benefit after 7 January will still leave a 2012/13 HICBC, based on the child benefit received after that date. The HICBC equals 1% of the child benefit paid for every £100 of income between £50,000 and £60,000.’
The charge will be payable ‘if a taxpayer, or their partner, has income of more than £50,000 for the tax year and one of them is entitled to receive child benefit’.
Over 155,000 people have already decided to stop receiving the benefit, said Lin Homer, HMRC’s chief executive.
HMRC said: ‘For those with income of more than £60,000, the tax charge is 100% of the amount of child benefit. For income between £50,000 and £60,000, the charge is gradually increased to 100% of the child benefit. Those affected will need to decide whether to keep receiving child benefit and pay the tax charge through self-assessment, or to stop receiving child benefit and not pay the new charge.
‘If a couple wish to stop receiving the benefit, the child benefit recipient should contact HMRC before the new charge starts on 7 January. If their income is less than £60,000, the tax charge will always be less than the amount of child benefit, so they could lose money to which they are entitled if they choose to stop receiving child benefit.’
Complex
Tina Riches, technical director at the CIOT, said: 'It is the [child benefit] claimant who has to take the decision. Each of the choices has pros and cons. For those who expect to have income between £50,000 and £60,000, the new tax charge will be less than the child benefit, so the household will usually be better off if the child benefit claimant continues to receive the child benefit and the higher income partner pays the HICBC.
‘If you are reasonably sure that your income for the year will be over £60,000, the claimant may want to opt out of receiving the child benefit, as the HICBC would wipe out the benefit received. You will then not face an unpleasant HICBC bill and avoid going into self-assessment (SA) if you are not already in SA.’
Riches added: ‘The situation will be particularly complex for those with fluctuating income or who gain or lose a partner or who don’t know which partner has the higher income. And, of course, for HMRC, who have to administer it all! The new charge is expected to require the equivalent of 450 full-time HMRC staff.’
