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60 second guide to Child Benefit

We explain how the new rules will work in 2013

Child Benefit will be means-tested from January 2013 and no longer paid to households where one partner earns over £60,000. Where they earn above £50,000 it will be progressively reduced.  

We explain the background to the change and what it means for those affected:  

Who gets Child Benefit at the moment?

A universal benefit since its introduction in 1977 (when it replaced Family Allowance), Child Benefit is currently available to all parents of children under 16 (and to some with older children). It is paid at two different rates: £20.30 per week for the eldest or only child, £13.40 per week for each additional child. 

Who will get Child Benefit in 2013?

From 7 January 2013, households where one partner earns more than £50,000 a year will lose their eligibility as the income of the highest earner rises – until it reaches £60,000- when they will no longer be entitled to Child Benefit at all.

The withdrawal of Child Benefit is based on the income of a household’s highest earner, rather than the combined income of both partners. This means that both partners can earn up to £49,000 and still receive full Child Benefit, even though their combined household income is £98,000.

How will Child Benefit be withdrawn? 

If Child Benefit is paid to households where one partner earns over £50,000, they will have to pay a High Income Child Benefit Charge, which rises progressively with income, until it reaches 100% at £60,000. 

The new charge will be collected by HMRC via a self-assessment. For high earners who are currently taxed via PAYE (pay as you earn) this will necessitate the completion of a tax return.

Can stop claiming Child Benefit?        

Yes. HMRC offers this as an alternative to receiving payments and then having to repay them after filing a tax return. For those earning over £60,000 it is a straightforward option and removes the need to complete a self-assessment tax return. 

Those earning over £50,000 and under £60,000 would lose out by stopping benefit payments however as they are entitled to some Child Benefit, just not the full amount.

What income is taken into account?  

The income of a household’s highest earner is taken into account for Child Benefit means testing, but this is their ‘adjusted net income’ rather than their gross income. 

Pension contributions are deducted before assessment and the total may also be reduced by gift aid payments or membership of a workplace salary sacrifice scheme. 

How will I know if I’m affected?

HMRC will be contacting high earners who they think the new rules may apply to. An estimated 1.2 million families will have their Child Benefit entitlement reduced, with 70% of these losing it entirely and 30% in part. 

Is Child Tax credit also withdrawn?

Child tax credit is a different benefit, also paid to those with children and also means-tested. The income threshold is lower than Child Benefit and the two should not be confused.

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