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Child benefit changes: how will you be affected?
Cuts to child benefit come into effect on Monday but it's not just the wealthy who will suffer.
by Michelle McGagh on Jan 04, 2013 at 15:52
Over one million families will find themselves worse off from Monday as the government implements its child benefit cuts, and it’s not just high earners who need to watch out.
The ‘squeezed middle’ will be even more squeezed as of 7 January as 1.1 million families see their child benefit cut. Currently 800,000 letters have been sent out by HM Revenue & Customs warning families that they will face a cut in benefits but another 300,000 have been left in the dark.
Will I lose my benefit?
At present every family is entitled to £20.30 a week for the first child and £13.40 for subsequent children, regardless of earnings.
However, under the new rules families where one parent earns between £50,000 and £60,000 will be affected. The child benefit will be reduced on a sliding scale between £50,000 and £60,000, when the family will lose the benefit completely.
To be precise, for every £100 over £50,000 that you earn you lose 1% of your child benefit.
For a family with one parent earning £60,000 a year that has three children, this cut will amount to around £2,450 a year.
What if we earn £60,000 a year combined?
This is an anomaly in the system. If one parent earns £60,000 a year and the other stays at home to look after the children then all child benefit is stopped.
But, if both parents earn £49,000 a year, a combined £98,000 a year total, then they get to keep their child benefit.
This ‘cliff edge’ nature of the cut has been the biggest bone of contention but the only other alternative is to means-test families, which is complex and costly.
Does the benefit just stop?
No, the benefit will not just stop or be reduced because you no longer qualify for the full amount.
Parents earning between £50,000 and £60,000 will have to decide whether it is best to write to HM Revenue & Customs to give up the benefit or continue taking the full amount and pay back the difference at the end of the year.
If you do decide to take the benefit and pay back what you owe at the end of the tax year you must do so through a self-assessment form. If you do not fill out the form you could be fined £100.
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