Why is this important?
Higher-income families to pay more tax if they keep Child Benefit
Date: 7 January 2013
Child Benefit has always been paid to all families with children, regardless of household income. However, this is changing from 7 January 2013. Child Benefit will still continue to be paid to everyone, but if you're a higher-income family, you'll have to pay extra tax if you choose to keep getting it. The extra tax you pay will cancel out some or all of your Child Benefit.
You'll start to pay more tax if either you or your partner have an income over £50,000 a year but you'll still continue to receive a smaller amount of Child Benefit depending on how much income you've got. If your income is over £60,000 a year, you'll pay so much more in tax that it will cancel out the entire amount of Child benefit you're getting.
You can choose not to receive any Child Benefit, if you don't want to pay the extra tax. However, HMRC is encouraging you to still fill in a Child Benefit claim form even if you choose not to actually receive any payments from them. This is because claiming Child Benefit can help you build up national insurance credits which can help protect your future state pension. It can also help protect your entitlement to other benefits such as Guardian's Allowance, and ensure your child is automatically issued with a National Insurance number before their 16th birthday.
You may be also able to avoid having to pay the extra tax and still receive Child Benefit, for example by reducing your taxable income. You could do this by, for example, paying more into your pension. Pension contributions are taken out of your income before you pay tax. This could therefore reduce the amount of income on which you have to pay tax to below the £50,000 limit. If you're thinking of doing this, it's always a good idea to get independent financial advice before you make a decision.