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Mr Nosy and the High Income Child Benefit Charge

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13 March 2013

As we all now know, Child Benefit is no longer universally available. A charge claws back payments from 7 January 2013 from those earning over £50,000 per annum.  This is the High Income Child Benefit Charge (HICBC). 

I am still receiving child benefit payments – what is going to happen now?

HMRC will need to decide whether that income should be clawed back via the HICBC. Where the position is not clear cut they require some quite detailed private information to help them decide. For example, where two people are married or living together the HICBC is levied on the highest earner in the household (who may or may not be the person who has actually received the child benefit). Your private arrangements are thus under the microscope.  

Where this charge is levied it is reportable on your tax return.  This means that we will soon have to ask you some personal questions that we haven’t had to before.  We need to do this to meet our responsibility as your tax advisors and to help you fulfil your own obligation to submit a complete and accurate return.

If you want to get ahead, a copy of the questions we will ask is available to download  here.

You may have given us some of this information before. Please bear with us as, in the interest of ensuring we have a complete picture, we will be asking all the questions of our affected clients.  It’s not all bad - some of this information will roll forward for future years, making the process easier in the future.

I’m definitely a high earner – can I shortcut this process?

You may have also heard that it is possible to make an election not to receive child benefit and avoid paying this charge.  This is still the case and we can help with this if you wish. Please note elections made after  January 2013 will only apply to future tax years i.e. the charge will be still be payable for the period from 7 January to 5 April 2013.

Due to the complex way in which this piece of legislation has been written there are many different specific scenarios covered.  Broadly, the charge is only levied where you or your spouse or partner is entitled to receive child benefit.  However, in certain circumstances you may also be liable to the charge if you have a child living with you.  If you are not sure whether the charge will apply to your family, or if you wish to discuss your position in general, your normal Hazlewoods contact will be able to help.

STOP PRESS: You have until 28 March 2013 to file an election to avoid the charge for  the 13/14 tax year.

HMRC announced last week that elections to stop receipt of Child Benefit for 2013/14 must be submitted by 28 March 2013. No one has a crystal ball but if you are clear that you or your partner’s income will be above the threshold consider making the election now.

A missed election now may come back to bite you when we calculate your tax liability if you are not expecting the HICBC. Please speak to Ruth Dooley or one of the Tax Team for further information.