Will you lose your child benefit?
Child benefit will be withdrawn for high income taxpayers from January 2013.
The threshold for this tax change is £50,000 and will be tapered on income from this figure up to £60,000 when no child benefit will be due.
The change has been the subject of much controversy. Take two families both with two children. Family A have only one earner whose income is £66,000. As this exceeds the limit of £60,000 no child benefit is due. Family B have both parents working with one parent earning £45,000 and the other £21,000. Although their combined income exceeds the limit they are still entitled to child benefit. This is because their incomes are not aggregated for child benefit purposes and as neither earns more than the limit on their own, full benefit is due.
The Government expects this change to affect 1.2m families. Are you one of them?
Is there anything you can do to ensure the benefit is retained.
There are some planning points that can be considered.
It would be beneficial to ensure that both spouses earn less than £50,000. Pension contributions could be made to reduce the level of income.
It may be possible to shift income by way of dividends.
Consider gift aid donations.
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Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.
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