From Monday a child benefit shake up, which means those earning over A?50,000 will have at least some of their payments removed, will affect more than 1.2million families. All change: Child benefit changes will affect 1.2 million families - but what should you do?
How do you work out if you are affected?If you earn more than A?50,000 a year, it is almost certain that you will be affected by the changes. For the future: If you're affected by the changes then it's up to your family to decide what to do. Take off pension contributions under the 'relief at source' scheme, this is where your pension provider has already given you tax relief at basic rate, ie many defined contribution work schemes. Fun and games: The changes are complex and mean that some will now have to complete self-assessment tax forms.
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Yet, despite a government push to explain the complicated and controversial plans, it is thought that a third of those families might still be in the dark regarding the changes. Technically no one is having child benefit payments removed, but the changes mean that some people will end up having them taken back through tax and so may no longer wish to receive them.
The same is true if you earn less than A?50,000, but have other sources of income, such as savings interest, investment dividends, or buy-to-let rent that pushes you over the benchmark.However, you can deduct some things, the main element for most being pension contributions, from your income to deliver the figure that the taxman will use called 'net adjusted income'. Over what period will my income be assessed and when will I have to start paying child benefit back?Unfortunately for an already complicated system, this confuses things further. At this stage you can deduct the amount of the contributions grossed up at the basic rate of income tax, so for every A?100 you personally paid in you can deduct A?125 from your income.The final total is your 'net adjusted income'This seems very complicated, how can you calculate what you owe?You can work out what you owe using the calculator on the HMRC website. Until you earn A?60,000 the high income child benefit charge will never reach the full amount of child benefit you are being paid.Whether you opt to give it up depends on how much you could get.


From 7 January the partner with the highest income will face an extra tax charge to take back child benefit, depending on how much they earn.
We explain this below.The charge is assessed on the partner with the highest income, rather than on overall household income. If this applies to you then you need to register for online self-assessment and submit your form online by 31 January 2014.
It means that there will be a charge for the first three months of this year and this will be based on your income from January.
You need to work this out and see if it is worth collecting it and then filing a self-assessment tax return. If their income is A?60,000 or more, the tax charge will be the same as any child benefit receiveda€“ effectively cancelling it out.
This leads to the problem where a family with one earner on A?52,000 would lose some child benefit, but if both earned A?50,000 then no charge is made, even though the total household income is A?100,000. The charge will be collected through filing a self-assessment tax return but you will not need to do this until January 2014.The Revenue estimates that 500,000 more people will have to fill in a self-assessment form as a result of the charge. If you don't fill in a self-assessment tax form on time, you will be fined.When do I have to decide on whether to give up child benefit by? What happens if I want to give it up after this date?You can avoid the charge and hassle of self-assessment by getting the person who currently receives the benefit (this may be different to the person receiving the charge), to tell HMRC they do not want to receive it. Even if you choose to pay through your tax code you will still need to complete a self-assessment tax return.I know my salary, but what can I take off to reduce my income this is calculated against? A If this is the case you may consider that ita€™s worth receiving the benefit and paying back the charge. The taxman will use something called 'net adjusted income' to decide how much child benefit should be paid back.First you need your total income from all your taxable sources of income, adding in any taxable benefits, including a company car or medical insurance.


If you miss this deadline then you will be liable to a tax charge - and thus have to complete a self-assessment form.
This would rise to A?1,959.36 in the next tax year as you are paying the charge on the full April to April child benefit payment. I earn more than A?60k is there any gain to be had in keeping child benefit income then paying it back at a later date?Yes, but it might be a lot of hassle. The charge is based on your tax-year income, which is why it is paid back via a self-assessment form. You will need to calculate how much you will earn in total for 2012 to 2013, ie before pay rise and after pay rise added together, and see if this pushes you above the A?60k figure.A The same thing will apply for any pay rises that send you over the limit in years to come.I am near the thresholds what can I do to reduce my income and keep the child benefit? If you are near the thresholds there are a number of ways that you can reduce your income to keep the benefit. Childcare vouchers You can ask your employer if they offer childcare vouchers to help you with the cost of childcare.
This limit applies to higher rate taxpayers who were members of a scheme before 5 April 2011, those who joined afterwards get a maximum of A?28 per week.The limit applies regardless of how many children you have but does apply to both parents, so you could get up to A?110 a week in all. If this comes in the form of vouchers it can be offered through salary sacrifice in which case it will deduct the amount you wish to claim from your salary in exchange for the voucher. PensionA Contributions to your employera€™s pension scheme (including extra voluntary contributions you make) can be made from your gross pay, before any tax is charged. This will reduce your net income.You can increase how much you pay to reduce your salary below the A?50,000 or A?60,000 threshold.



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