Families where one parent earns more than £50,000 a year will no longer be able to claim the full benefit. Those above this threshold who fail to opt out face a costly tax bill.
What is it all about?
The Government has withdrawn child benefit from high-income households. However, rather than cancel the payments, it is imposing a tax charge to claw back some or all of the benefit. This new High Income Child Benefit Charge (HICBC) came into effect at midnight.
How will eligibility change?
In the 2012 Budget, Chancellor George Osborne announced an amended plan to steadily withdraw child benefit from families where one parent earns more than £50,000. The amount received will reduce between £50,000 and £60,000, with those earning above £60,000 being entitled to nothing.
What does it mean?
A charge of 1% of child benefit for every £100 of income above £50,000. Those earning £60,000 or more will face a tax charge equal to the whole amount. If two people live as a couple the higher income counts, not joint income.
Can you give examples?
With a single earner on an income of less than £50,000, a family keeps the full child benefit, which for two children is £1752 a year.
Even a family with two incomes of £45,000 will keep all of their child benefit as neither earns in excess of the £50,000 threshold.
A single-income family earning £54,000 can keep some benefit, leaving an annual sum for two children of £1052 after tax.
A two-income family of £20,000 and £61,000 would receive nothing. As one partner earns over £60,000 they must either stop claiming or repay the full £1752 through the tax charge.
How will it work?
If a parent earns more than £50,000, they may choose to stop claiming child benefit or ask their partner to stop doing so. If either they or their partner continue claiming it, the higher earner must declare this to the taxman. It will be collected through self-assessment and parents must register by October 7.
Have many people opted out so far?
Some 200,000 people have opted out after being contacted by the taxman.
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