Child Benefit, to opt-out or not to opt-out?
The recent changes in child benefits have affected 1.2 million taxpayers. As it stands, Child Benefit payments only apply to children aged 16 and under. Families are entitled to claim £1,055.60 per year for the eldest child and £696.80 for each child after that. This means that, if you have two children, you’re entitled to receive a total annual payment of £1,752.40.
However, since the 6th January 2013, all benefits are now means tested. What exactly does this mean for you?
Who is affected by the changes?
The High Income Child Benefit charges will only affect families where one member is earning more than £50,000 a year. People earning £50,000 a year (after any pension contributions) will still receive child benefits, but they will be forced to repay a certain amount of this as a tax charge.
Taxpayers with income more than £50,000 will have to pay back 1% of the received child benefit for every £100 over £50,000 they earn, for example if the taxpayer earns £55,000, he will have to pay back 50% of the child benefit. Anyone who earns over £60,000 must pay back the full amount of child benefit.
Can I opt out of receiving child benefit?
Yes you can. In fact, 270,000 families have decided they would rather not receive the money than have to pay it back at the end of the year through a self-assessment form.
You should only consider opting out if you are certain that your income (after any pension payments) will be over the £60,000 threshold. If you've yet to opt out, the initial deadline to opt out was January 6th 2013, but you can opt out at any time.
If you've already received a payment, you will need to fill in a self-assessment form between April 6th 2013 and January 31st 2014 and pay back any money you owe.
So should I opt out?
If your income is over £60,000, you are still entitled to the benefits - you will just have to pay it back at the end of the financial year. There are several reasons you shouldn't opt out, even if you do earn over £60,000:
● If you are planning to have another child
● If your income is looking unstable for the next year
● If you’d like to keep all the child benefits in a savings account and earn a small amount of interest
● If you are a full-time carer for children aged 12 and under, receiving child benefits will continue to earn you National Insurance credits for the state retirement pension.
If you need help making an informed decision about opting out and to check how much, if anything, you need to pay back, SimpleTax has a basic checker available at www.gosimpletax.com/child-benefit.