Whether your accountant does your tax return for you, or you do it yourself, you may get caught by the new child benefit tax rules, perhaps the widest ranging change affecting the self-assessment system this year. The tax on child benefit for high-earners, which came in to force on 7 January 2013, means there are over a million more returns due, as more taxpayers are drawn into the self-assessment net.
The rules force households receiving child benefit, where one parent earns more than £50,000 a year, to complete a self-assessment return, so the Treasury can claw back some of the benefit paid. The return requires child benefits to be declared by the highest earner in the household and then uses other information entered to work out how much they are due to be paid back. This is effectively 1% for every £100 earned between £50,000 and £60,000, so that above £60,000 it is all paid back.
Some tips to note:
- You can avoid the need to complete a tax return if you simply apply to stop receiving child benefit - possibly worth doing if one earner has an income of £60,000 or above - you can do this on the HMRC website
- You may want to continue to receive the benefit and put it into a high interest account until the tax is due
- The child benefit relevant to the tax return for 2012/13 is only that paid between 7 January and 5 April 2013
- The relevant earnings for teh £50k threshold are calculated on total taxable income, i.e. all income and benefits (such as company car), including interest, rent or dividends, less any pension contributions and charitable donations - so you may have an income of £52,000 but actually be below the threshold due to pension contributions, or equally have an income of £48,000 but be pushed over the limit by beenfits of inteerst earned.
- There is a calculator to help at: https://www.gov.uk/child-benefit-tax-calculator