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Child benefits changes.

Tuesday, 8 January 2013
Earning between £50,000 and £60,000 means you must repay some or all of your child benefit. You could opt out entirely but is that sensible?

The rules with regards child benefit have changed. From now on, instead of being a universal benefit that all families receive, regardless of income, it has become means-tested.
Rather than simply stopping the benefit for families earning more than a certain amount the government has introduced a tax charge. All families can still claim and receive child benefit but anyone earning more than £50,000 a year will be forced to repay come of the child benefit in a tax charge. Anyone earning £60,000 must repay their entire entitlement.
Not everyone will want to receive the money then repay it through a self-assessment form so the government has allowed people to opt of getting the cash. Choosing to opt out means foregoing the whole entitlement, so you probably won’t want to consider this unless you earn £60,000 or more. Midnight on the 6th January 2013 was the deadline for opting out and making sure you do not receive any payments under the new regime. If you missed the deadline don’t panic.
If you do want to opt out rather than going through the complexity of self assessment it probably is not too late to do so. Unless your child benefit payment went into your bank account on the 7th January 2013 you can probably opt out in time to stop it. You can call HM Revenue and Customs on 0845 302 1444 to do so.
If you have received a child benefit payment you can still opt out, you can do so at any time. However you will need to fill in a 2012-2013 self-assessment form in time for the 31st January 2014 filing deadline and repay any money you have received. If you are already in the self-assessment system you just need to make sure you can afford to repay the benefits you have received.
There are circumstances in which it makes sense not to opt out. If your income is on the border of £60,000 and you can’t be sure you will definitely earn more in this tax year i.e. 2012-2013 or next i.e. 2013-2014 you might be wise to keep hold of the benefit. If you have opted out and your circumstances change you can opt back in. If you find at the end of the tax year that you didn’t go through the threshold you cannot apply for the money in arrears.
Rather than stop receiving you could put the money in a savings account each month so it is there when the time comes to pay your tax bill. Child Benefits received between April 2013 and April 2014 will not need to be declared until the 31st January 2015, in the meantime they could earn you some savings interest although at the very low interest rates the interest will not be much.
The same is true if you think you might see your income fall for any reason e.g. your work is looking unstable or you are planning to have another child. If you can be disciplined enough to keep the money in a savings account until you need it for the tax bill you may prefer to consider that option.
Also the system may change with any change in government as it is unfair that couples earning £49000 each can receive the whole benefit while families with one earning over £50,000 and the other a full-time career lose some if not all the child benefit. So some changes may well be made after the next election which is only two years away now.
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