From 7 January 2013, people who earn more than £60,000 a year will no longer be entitled to child benefits, while those earning between £50,000 and £60,000 will see their benefit removed on a sliding scale, depending on their exact earnings.
An estimated 1.2 million households will be affected, while around half a million more will need to complete a tax return.
Liam Collins from 1st Contact Accounting says that families hoping to hang onto their benefit must remember the cut in child benefit is determined by taxable income rather than gross income. “A company car, private health cover, savings interest, investment income, rental income and even the proceeds of selling certain assets can count towards your income total.”
“One of the best ways for people to avoid losing the benefit is to reduce their adjusted net income by for instance putting more money into their workplace pension,” says Collins. “Even though their take-home pay might be reduced, they could keep their child benefit and avoid the risk of losing other benefits.”
Taxpayers who want to stop receiving child benefit and thereby avoid the need to fill in a self-assessment tax return, must let HMRC know before the 7th of January 2013.
For excellent tax services and advice and information about UK tax, visit www.1stcontact-accounting.com.