2 min Read
06 Sep 2013

Written by Damien

Damien is one of the most widely quoted money and investment experts in the national press and has made numerous radio & TV appearances. He created MoneytotheMasses.com while working in the City when he became disillusioned with the way the public were left to fend for themselves because they could not afford financial advice.

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Child Benefit tax trap – parents have until 5th October to avoid it

child

High earners receiving child benefit need to act fast to avoid tax trap

Child Benefit used to be a universal benefit available to all parents however, as of 7th January 2013 it became means-tested. Child benefit is now withdrawn gradually once one person in a household earns £50,000. The rate of withdrawal is 1% of child benefit for every £100 earned over £50,000, resulting in total withdrawal once earnings of £60,000 have been achieved.

Unless parents opted to stop receiving child benefit, the deadline for which was 6th January 2013, they have continued to receive it. However, those earning over £50,000 per annum who didn't opt out will pay a tax charge via self assessment which effectively means that they repay part of their child benefit. Anyone earning over £60,000 will repay their entire child benefit.

The option of opting out was introduced so that people were not forced to register for tax self assessment and go through the administration headache to simply repay child benefit they were not entitled to. Those who didn't opt out, so received child benefit in the 2012/13 tax year, and are affected by the £50,000 limit must register for self assessment by 5th October 2013. So time is running out.

Failure to register for self assessment and submit a tax return can lead to a fine and penalty from HMRC. So if you are affected make sure you register for self assessment via the link below.

FURTHER READING

 

image by Clare Bloomfield / FreeDigitalPhotos.net

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