Parents across the UK will be receiving letters from HMRC this week about losing child benefits. If one parent earns over £50,000 child benefits they receive will be reduced or stopped.
Some 500,000 people are set to receive these letters and accountants are getting ready for a flood of calls from confused parents and those wanting advice. The 500,000 parents due to receive the news will be asked to complete self-assessment tax forms.
The cuts will come into effect in January 2013. Currently, child benefits are £20.30 a week for the first child and £13.40 for each child born after that. Any parents earning between £50,000 and £60,000 will have their child benefits reduced on a sliding scale. This equates to a potential additional 'tax' of 17.5% on earnings between £50,000 and £60,000 for a 2 child household.
However, concerns have been raised that if two parents in a household earn just under £50,000 each they will still receive their child benefits, whilst if there is one parent earning over £60,000 they will lose all of their benefits.
Many people on straightforward salaries will be unable to mitigate this but if have your own business Ellis & Co may be able to help. Please contact Peter Way-Rider.