Introduction »

State Benefits for having kids - not if you earn £50,000

Child Benefit is currently paid to anyone with a child under 16, or aged 16 -19 if they are in relevant education or training. The amount is £20.30 a week for one child and £13.40 a week for each subsequent child. The benefit is not currently means tested although this is set to change.

Changes ahead

For taxpayers who have income in excess of £50,000, where either they or their partner (who are living together) is in receipt of Child Benefit, a new tax charge is to be introduced from 7 January 2013. The effect of the charge is to claw back some or all of the benefit payable.

How does the clawback work?

The clawback will apply at a rate of 1% of the full Child Benefit award for each £100 of income between £50,000 and £60,000. The income considered for this calculation is adjusted net income, broadly gross taxable income from all sources reduced by losses and specific reliefs such as Gift Aid and pension payments. The charge on taxpayers with income above £60,000 will be equal to the amount of the Child Benefit paid. Where both partners have income in excess of £50,000 the charge will apply to the partner with the higher income.

Other options and considerations

Child Benefit claimants will be able to decide not to receive Child Benefit if they or their partner do not wish to pay the new charge.

However, it is recommended that a claim is still made (even where no benefit is receivable) where a partner is at home caring for a child/children under 12. This is to ensure that the individual’s entitlement to National Insurance Credits continues as these contribute towards obtaining a State Retirement pension.

Please contact us if you would like more information about this issue.

Introduction »