Child Benefit Changes to benefits 2013
Summary: This article explores the changes to Child Benefit payments that impact everyone earning over £50,000 pa.
The basic change
If either you or your partner has an income of more than £50,000 a year then, as of January 2013, you will have to pay back some or all of your child benefit in the form of extra income tax. If you and your partner each have an income of less than £50,000 then there will be no change.
How does it work?
You will still get paid the full amount of Child Benefit each month (or each week). However, whichever one of you has the higher income will have to pay more income tax to repay the proportion of Child Benefit you're no longer entitled to.
How much will you get?
Basically, you'll pay back 1% of your family's Child Benefit for every £100 of income over £50,000. For example: In a married couple - if Mrs stays at home to look after a new baby and Mr earns £51,000pa, he will have to pay some of the Child Benefit back. His income is 10x£100 over the limit so the extra tax is 10% of their Child Benefit of £20.30 per week. He pays extra tax of £105 a year.
If someone earns over £60,000pa then the full amount of Child Benefit received wil have to be paid back through income tax.
- You could choose not to receive your Child Benefit payments any more:
- This avoids the hassle of paying extra income tax
- You won't have to complete a tax return
- If your income is between £50,000 and £60,000 you'll end up out of pocket since you'll be giving up the proportion of income tax you are still entitled to.
- You could choose to keep your Child Benefit payments:
- If your income is between £50,000 and £60,000, you will still get however much you're entitled to
- Even if you're earning over £60,000, if you put your Child Benefit aside in a savings account you can earn interest on the money before you have top pay your tax bill
- You will need to pay the extra tax.
- You will have to complete a tax form.
Child Benefit and Debt
Of course Child Benefit loss only relates to relatively high-earners. But high earners can still find themselves repaying debts, and it may be that with several children to look after the loss of this income can create a real problem in meeting all financial commitments. Many people with good incomes still have a low disposable income figure, and it makes sense to find out ways of reducing debt repayments to enable priority outgoings to be met.
The above is provided as information only. Iva.co.uk does not provide debt advice. You must always seek professional advice before taking any action to resolve your debts.