High Earners Can Opt Out of Child Benefit
13 December 2012
The High Income Child Benefit Charge (HICBC) starts on 7 January 2013, and will affect taxpayers with income of more than £50,000.
Those affected will need to decide whether to keep receiving Child Benefit and pay the tax charge through Self Assessment, or to stop receiving Child Benefit and not pay the new charge. If their income is between £50,000 and £60,000, the tax charge will always be less than the amount of Child Benefit, so they could lose money to which they are entitled if they opt to stop receiving Child Benefit.
Another consideration in relation to Child Benefit is 'Home Responsibilities Protection'. Where the mother remains in the home to look after children, her state pension entitlement is protected while she claims Child Benefit. Therefore, if a decision is made to opt out of receiving Child Benefit, under the new rules, it is important to first ensure that Child Benefit is claimed for every child, and then the individual can elect not to receive payments, thereby protecting the stay-at-home mother’s state pension.