High income benefit charge takes effect
George Osborne’s claw back of child benefit from high earners comes into force today, with financial consequences for such parents who are cohabiting; married, separated or anything else in between.
From January 7th 2013, the High Income Benefit Charge will apply where a taxpayer or their partner’s income exceeds £50,000 in a tax year, and if they or their partner receive Child Benefit.
Affected parents have been urged to consider a range of strategies from financial advisors, including whether to stop receiving Child Benefit – as almost 200,000 people have applied to – thereby escaping the new charge.
However for those with income of more than £60,000, the tax charge is 100 per cent of the amount of Child Benefit while for income between £50,000 and £60,000, the charge is gradually increased to 100 per cent of the Child Benefit.
Speaking to ContractorUK recently, freelancers’ IFA ContractorMoney said: “Contractors have a degree of flexibility in terms of how they draw their income and therefore have scope to structure their affairs to avoid the worst of the child benefit claw back.”