Child benefit tax charge
The taxation of child benefit, despite being somewhat controversial, is being implemented by the Government. The scheme is set to commence from 7 January 2013 for the 2012/13 tax year and for the first year of the charge the full amount of income for 2012-13 will be taken into account.
Those individuals in receipt of child benefit, who have (or whose partner has) more than £50,000 adjusted net income will be charged more tax in order to reduce the child benefit they receive. Where adjusted net income exceeds £60,000 the additional tax charged will completely cancel out any child benefit received.
In order to avoid paying the additional tax, claimants have the choice to opt out of receiving child benefit; otherwise they will automatically be brought into the self assessment tax regime.
Alternatively the additional tax charge only applies to an individual whose adjusted net income is over £50,000. Where possible, individuals could consider planning their income particularly where they could divert part of their earnings to another member in the household, make further pension contributions or cap their earnings in any given tax year via the timing of dividend payments etc.
It could be possible for an individual to bring their earnings below the threshold resulting in no additional tax being payable, whilst not affecting the overall household income.
To talk to somebody about your specific situation in more detail please contact our tax manager Sarah Grandison on 02476 518 555 / 0121 711 2468.