Child Benefit Changes, are you affected?

This week the government will be sending out letters about losing child benefit. Most people shouldn’t be affected. If you’re living in a household where either you and/or your partner are both earning more than £50k, you will have your child benefit effectively reduced or stopped. If you and/or your partner collectively earn less than £50k, you shouldn’t be affected. But the changes won’t come in until 7th Jan 2013.
Below is a great BBC report on the changes, which you can also view here:
One million households will receive letters from the UK tax authority this week about losing child benefit. Households where at least one person earns more than £50,000 will have the benefit effectively reduced or stopped.

Officials say it means as many as 500,000 parents may have to complete self-assessment tax forms. A flood of calls for advice is expected.

Ministers say the changes, which take effect on 7 January, are needed so the better-off help deficit reduction. Letters will be sent to people who earn more than £50,000 who live at an address where child benefit is received to explain how their family is likely to be affected.

Child benefit currently stands at £20.30 a week for the first child and £13.40 for each child after that. Under the new approach, families where one parent earns between £50,000 and £60,000 will have their benefit reduced on a sliding scale. The change will cost families with three children and at least one parent earning more than £60,000 about £2,450 a year – the equivalent of a £4,000 pay cut.

Child benefit ‘households’

  • Married couples living together
  • Civil partners living together
  • A man and a woman who are not married to each other but who live together
  • A man living with a man or a woman living with a woman who are living together as if they were civil partners.

And it will produce anomalies, such as in the case of two-earner households where both parents earn £49,000. They will keep all their benefit, while others who have one parent on £60,000 and the other staying at home will lose all of theirs.

Hundreds of thousands of parents will have to complete a self-assessment tax form. Accountants say they expect calls from people confused by the change, or looking to avoid losing benefit by legal means, for example, making additional pension contributions.

Child benefit facts

  • Child benefit is a tax-free payment that is aimed at helping parents cope with the cost of bringing up children
  • One parent can claim £20.30 a week for an eldest or only child and £13.40 a week for each of their other children
  • The payments apply to all children aged under 16 and in some cases until they are 20 years old
  • The system is administered by HM Revenue and Customs (HMRC) which pays out to nearly 7.9 million families, with 13.7 million children

Meanwhile, senior Conservatives have released poll results that suggest 82% of the public support plans to cut child benefit for high-earning families, while 13% oppose it.

Populus surveyed 2,066 British adults between 24 and 26 October. A Treasury spokesman, responding to the poll, said: “In a period when the government is having to reduce welfare spending, it is very difficult to justify continuing to pay for the child benefit of the wealthiest 15% of families in society. The unprecedented scale of the deficit has meant that the government has had to make tough choices to reduce public spending; but we have always been clear that those with the broadest shoulders should carry the greatest burden.”

The spokesman added that 85% of all families with children would be unaffected by the changes and would continue to receive child benefit in full.