Child Benefit – the new tax charge is here

We’re approaching the silly season with a key focus on getting all personal tax returns done between now and December (we don’t do last minute in January – remember!).

The key change evident as part of this year’s tax return exercise, is a new box relating to child benefit.

If you recall, there was lots in the press a year ago about the fact that the Chancellor had decided to effectively withdraw child benefit from families where one parent earns more than £60k, and to gradually withdraw the child benefit from families with the highest earner in the £50k – £60k bracket.

Rather than do this by stopping the payment of the actual child benefit, the mechanism is that the child benefit will be clawed back via the higher earner’s tax as part of the annual tax return process.  Of course there is also the option to opt out of receiving child benefit entirely, but unless this step has already been taken, the child benefit section on the tax return will have to be completed.

HMRC will be starting the process of clawing back child benefit through information provided to them on the 12-13 income tax returns.  There is a box on the tax return this year which asks “Did you or your partner receive child benefit on or after the 7 January 2013?”  Once this is selected there is a series of follow-up questions to determine whether you or your spouse / partner is the highest earner, how much child benefit you have actually received, how many children this relates to and therefore how much of the child benefit received is to be effectively “repaid” to HMRC.

Therefore, when we request information about your tax returns this year, please do not be surprised at the additional interrogation around this area!

One further point to note – not for our own tax return clients, but potentially for your spouses whom we do not represent…  if they earn more than £50k from employment income and have not had to complete a tax return previously, they may well have to start completing an annual tax return if child benefit is received AND they are the highest earner in the couple.  The deadline for registering yourself as having to complete a 12-13 tax return is 5th October and tax returns will need to be completed, plus any tax owing paid by 31st January 2014.