UK Child Benefit Changes
Posted on March 26, 2011 | No Comments
Neil Harries asked:
In the political party conferences this Autumn, it is the Chancellor George Osborne’s announcement about the changes to Child Benefit (CB) that has received the most publicity. The press has jumped upon this with many television headlines and news articles devoted to it. The aim of this article is not to give a political opinion, but simply to outline the changes and to explain who they are likely to affect.
The Current Rules
Let us first consider the current rules, starting with who can currently claim CB, HMRC website states:
“You may be able to get Child Benefit if any of the following applies:
your child is under 16 your child is over 16 and in education or training that qualifies for Child Benefit your child is 16 or 17, has left education or training that qualifies for Child Benefit and is registered for work, education or training with an approved body
You can get Child Benefit even if your child doesn’t live with you. However, if they live with someone else, you can only get Child Benefit if:
you pay towards the upkeep of your child what you pay is at least the same as the amount of Child Benefit you get for your child the person bringing up your child is not getting Child Benefit for them – if you and another person both claim Child Benefit for the same child, only one of you can get it
You can also claim Child Benefit for a child even if you’re not their parent, but you have to be responsible for them to qualify.”
The current amount of child benefit is 20.30 for the eldest child and 13.49 for each additional child.
The changes
From 2013 CB is to be scraped for higher rate tax payers. This means that if either parent is a higher rate taxpayer, earning more than currently approximately 44,000 per year, then the family will no longer be eligible for child benefit. This means that a family with three qualifying children could be worse by just under 2,500 per year.
This has given rise to a number of criticisms best illustrated by the following example:
Family 1 has 3 children, the husband works and earns 45,000 per year the wife is on a career break to look after the children. Thus, their total family income is 45,000 per annum. From 2013 they will loose their CB as the husband is a higher rate tax payer.
Family 2 has 3 children also, both husband and wife work and each earn 43,000 per year. Their total family income is 86,000, but as neither couple is a higher rate tax payer they will not loose their CB in 2013!
There may be limited ways of keeping the CB if the main wage earner in the family is close to the higher rate tax band, such as:
Opting for extra paid holidays instead of a pay rise Increasing employers pension contributions instead of pay Sharing child care amongst the couple, with each partner only working part time In extreme case you may benefit by taking a pay cut!
It is recommended that you do not take any such action without speaking to a qualified independent professional.
The author does not guarantee the accuracy of any information provided in this article and recommends that you do not take any action, whatsoever, based on the information provided. By the fullest extent permitted by law, the author does not accept any responsibility for any actions you may or may not take based on information contained in this article. This article contains general information and is not a substitute for specific independent professional advice. In addition it is emphasised that much of the information provided in this article is time sensitive and information contained within it may be out of date.
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In the political party conferences this Autumn, it is the Chancellor George Osborne’s announcement about the changes to Child Benefit (CB) that has received the most publicity. The press has jumped upon this with many television headlines and news articles devoted to it. The aim of this article is not to give a political opinion, but simply to outline the changes and to explain who they are likely to affect.
The Current Rules
Let us first consider the current rules, starting with who can currently claim CB, HMRC website states:
“You may be able to get Child Benefit if any of the following applies:
your child is under 16 your child is over 16 and in education or training that qualifies for Child Benefit your child is 16 or 17, has left education or training that qualifies for Child Benefit and is registered for work, education or training with an approved body
You can get Child Benefit even if your child doesn’t live with you. However, if they live with someone else, you can only get Child Benefit if:
you pay towards the upkeep of your child what you pay is at least the same as the amount of Child Benefit you get for your child the person bringing up your child is not getting Child Benefit for them – if you and another person both claim Child Benefit for the same child, only one of you can get it
You can also claim Child Benefit for a child even if you’re not their parent, but you have to be responsible for them to qualify.”
The current amount of child benefit is 20.30 for the eldest child and 13.49 for each additional child.
The changes
From 2013 CB is to be scraped for higher rate tax payers. This means that if either parent is a higher rate taxpayer, earning more than currently approximately 44,000 per year, then the family will no longer be eligible for child benefit. This means that a family with three qualifying children could be worse by just under 2,500 per year.
This has given rise to a number of criticisms best illustrated by the following example:
Family 1 has 3 children, the husband works and earns 45,000 per year the wife is on a career break to look after the children. Thus, their total family income is 45,000 per annum. From 2013 they will loose their CB as the husband is a higher rate tax payer.
Family 2 has 3 children also, both husband and wife work and each earn 43,000 per year. Their total family income is 86,000, but as neither couple is a higher rate tax payer they will not loose their CB in 2013!
There may be limited ways of keeping the CB if the main wage earner in the family is close to the higher rate tax band, such as:
Opting for extra paid holidays instead of a pay rise Increasing employers pension contributions instead of pay Sharing child care amongst the couple, with each partner only working part time In extreme case you may benefit by taking a pay cut!
It is recommended that you do not take any such action without speaking to a qualified independent professional.
The author does not guarantee the accuracy of any information provided in this article and recommends that you do not take any action, whatsoever, based on the information provided. By the fullest extent permitted by law, the author does not accept any responsibility for any actions you may or may not take based on information contained in this article. This article contains general information and is not a substitute for specific independent professional advice. In addition it is emphasised that much of the information provided in this article is time sensitive and information contained within it may be out of date.
Create a video blog…instantly.