As you may know, there are changes to the UK tax system concerning Child Benefit which take effect from 7 January 2013. This could affect you if someone in your household is in receipt of Child Benefit and if you or your spouse/partner has an income of more than £50,000.
The letter from HMRC asks how much ‘individual income’ a recipient of the benefit or their partner may earn. Importantly, this does not just include salary. Dividends, income from rental properties including holiday homes, self-employed earnings, interest on savings and pensions all need to be taken into account. Also consider whether any Gift Aid payments have been made to charities, or whether pension contributions have been made as these can be deducted when determining the final figure.
If you are affected you can either elect to stop receiving the Child Benefit from 7 January, or continue to receive the Benefit and pay an increased tax bill on 31 January 2014. If you do the latter, you may need to make some additional entries on your tax return. If you are the higher of two income earners in your relationship, you will suffer the tax liability even if you are not the recipient of the Child Benefit itself.
If you think that you may be affected, we would be happy to discuss the options available to you – please contact us for further information.
You can also find further guidance on the HMRC website www.hmrc.gov.uk/childbenefitcharge/introduction.htm