HM Revenue & Customs have now started sending out letters about the High Income Child Benefit Charge (HICBC).
This new tax is designed to claw-back child benefit from families where one or both spouse/partner earns over £50,000.
From January 7, 2013 the higher earner will be subject to a claw-back on Child Benefit the family receives.
The charge will be one per cent of the Child Benefit for every £100 of income above £50,000. Above £60,000 the charge will cancel out the Child Benefit.
This tax charge will be paid by the higher earner regardless of which spouse/partner receives the Child Benefit.
They will need to complete a tax return and if they do not currently complete one, then they must register to do so.
In 2012/13 only child benefit received after January 7, 2013 is subject to the charge, but in future years it will be the full amount received in the year. The first tax payment will be due on January 31, 2014 and amounts less than £3,000 may be collected by amending a 2013/14 PAYE tax code.
Alarmingly, if for example you currently earn £50,000 and claim Child Benefit for two children, then receive a £5,000 bonus, the combination of Income Tax, National Insurance and HICBC result in a total charge of just under 60 per cent.
As should be expected with a new tax, there are traps for the unwary. There are also a number of options a family can consider to help minimise the effect of this additional burden.
Paish Tooth as accountants and chartered tax advisors has the expertise to advise you and your family.
There are simple measures that anyone can take such as making pension contributions, gift aid donations or equalising income between partners. If you are self- employed or run your own company, we can help you organise your business to ensure you pay the minimum tax you are obliged to do.
To find out how we can help plan for this latest tax, contact Patrick Cooper or Karen Kay at Paish Tooth on 01242 584050 or email info@paish tooth.co.uk.