Child Benefit and Tax Credit changes

The Government is changing benefits

What is child benefit?

A tax-free payment to help parents cope with the cost of bringing up children. One parent can claim £20.30 a week for an eldest or only child, and £13.40 a week for each of their other children.

The payments apply to all children aged under-16 and in some cases until they are 20 years old. The system is administered by HM Revenue and Customs (HMRC).

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What’s changing?

Since it was introduced, Child Benefit has been a set amount per child, given to all families regardless of income.

Form January 7, 2013, Child Benefit will be withdrawn or reduced from higher earners. Parents earning £60,000 per year or more will no longer receive Child Benefit. Those earning £50,000 per year or more will see the benefit reduced.

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How much will I lose?

If both you and your partner earn less than £50,000 a year, you will keep all of your child benefit payments.

If either you or your partner earn more than £60,000, you will lose child benefit in full.

If you or your partner earn between £50,000 and £60,000 you will lose 1% of your child benefit payments for every £100 you earn above the £50,000 threshold – so for example if you earn £55,000 you will lose 50% of your child benefit.

Earnings will be calculated by HMRC from your main salary, any other jobs you have, rental income and anything you earn from savings and investments.

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Will my Child Benefit payments stop?

No, even if you earn more than £60,000 your child benefit will continue to be paid as normal. Instead, the government will take the equivalent value back through an additional Income Tax charge.

If both you and your partner earn over £50,000, the additional Income Tax charge will be applied to whoever earns the most, regardless of who the child benefit is paid to.

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What if I’m separated from my partner?

If your ex-partner earns more than £50,000 but you receive child benefit for your children, you will be permitted to keep the payments in full (providing you earn under the £50,000 threshold).

If you earn more than £50,000 but have separated from a partner who claims child benefit for your children, you will not have to pay the additional Income Tax charge.

If you and your partner separate after the change takes effect you will no longer be liable to pay the additional Income Tax charge.This will take effect from your date of separation, rather than the end of the tax year – so you will need to inform HMRC.

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Can I decide to stop my Child Benefit payments?

If you want to avoid the additional Income Tax charge, or don’t want your partner to have to pay the tax because you receive child benefit, you can opt to stop your child benefit payments by notifying HMRC.

If you do this you should still complete a child benefit application if you have any more children, even if you don’t want to claim child benefit for them.

This is because your child benefit entitlement affects whether you qualify for National Insurance credits and could affect whether you will be able to claim a full state pension.

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Tax Credits

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