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Child Benefit Tax

From January 2013, if you are claiming child benefit and you or your partner earns more than £50,000, you will be liable to pay a new tax – subject to the proposals becoming part of the Finance Act.

A partner is defined as:

  • married couples or civil partners living together
  • a man and a woman who are not married to each other but are living together
  • a man living with a man or a woman living with a woman as if they were civil partners

Under the planned changes, tax will be charged at one percent of the child benefit received on adjusted net income over £50,000. If you earn over £60,000, you will be taxed the equivalent amount of the child benefit received by yourself, or your partner, unless it is no longer claimed.

Whichever partner has the highest income will be liable for the tax, regardless of who actually claims the child benefit. Therefore, you and your partner will need to share financial information to avoid penalties for non-compliance.

Adjusted net income is calculated as your total income from employment and/or self-employment, as well as from pensions, property, savings and dividends, minus specified deductions, such as gross pension contributions, trading losses and gross Gift Aid.

You can also add back any relief for payments to trade unions or police organisations.

As taxation specialists, the team at Moore Thompson can help reduce, or even eliminate, this tax charge by seeing if there is any scope for reallocating part of the higher earner’s income to their partner.

For more information on this tax charge and how Moore Thompson can help minimise your liabilities, please contact us.

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