The recipients of Child Benefit may be worse off with effect from January 2013, depending on the income received by their “household”, as a result of changes to be introduced.
Child Benefit is, and will continue to be, received on a “flat rate” basis, irrespective of the income of the recipient. However, with effect from January 2013, Child Benefit will be clawed back where one person in a household has an annual income of more than £50,000. The claw back will be 1% in Child Benefit for every £100 earned over £50,000, with the Child Benefit being reduced to nil where income exceeds £60,000.
The new rules mean that if a husband and wife each have an annual income of £50,000, there will be no claw back of the Child Benefit received. However, if for example, the husband has total income of £60,000, while his wife has no annual income, there will be a claw back of all the Child Benefit received, even though total joint income is £40,000 less than if they each had income of £50,000.
Therefore, a husband and wife should ensure where possible, that their remuneration planning for the year ended 5 April 2013 minimises the claw back of any Child Benefit received.
If you would like to discuss any planning issues please contact Nick Dee or Peter Griffiths on 01242 680000.