Contact Us

Villars Hayward LLP
Boston House, Boston Road
Henley-on-Thames RG9 1DY

Tel: 01491 411077   Fax: 01491 410199

Return to Latest News

 

 

 

 

 

Thousands to be pulled into self assessment system under child benefit reforms

 

Hundreds of thousands of families may be required to complete a self assessment tax return for the first time when the forthcoming child benefit cuts take effect.

 

Experts have warned that around 1.2 million households could lose out, while a further 500,000 people may be dragged into the self assessment system as a result of the changes.

 

The ICAEW said: ‘HMRC estimates that up to 500,000 taxpayers who do not currently complete a self assessment return will be liable and will have to complete a tax return.

 

‘If you are one of them, you need to start collecting together your paperwork ready to file a paper return, due in October 2013, or an online self-assessment return in January 2014.’

 

HMRC is currently sending letters to those affected by the child benefit reforms, which are due to come into effect on 7 January 2013.

 

Under the changes, there will be an income tax charge which equates to 1% of child benefit for every £100 of income that exceeds £50,000. Once income reaches £60,000 the charge is equal to the full amount of child benefit received for the tax year.

 

Where it is certain that the charge will bite, claimants can elect not to receive their child benefit.

 

The tax charge applies both to taxpayers whose income exceeds £50,000 and who are in receipt of child benefit, and to taxpayers with income exceeding £50,000 and whose partner is in receipt of child benefit. If both partners have income in excess of £50,000, the charge applies to the partner with the highest income.

 

HMRC predicts that the average loss to families will be roughly £1,300 per year.

 

Following concerns from some experts, HMRC recently outlined new guidance for parents who opt out of receiving child benefit but subsequently suffer a drop in income.

 

The tax authority has now confirmed that these people will be able to claim their benefit retrospectively.

 

If you think you may be affected by the changes to child benefit, please contact us for advice.