Don’t Forget About ATED! It is April once again, which these days as well as…
The 2013 tax year has seen changes made to the Child Benefit system which means that more people will have to do self-assessment tax returns or be liable to a penalty!
So what are the new rules and how do they affect you?
First of all, it is necessary to define income. Income is the amount of money you receive before tax and before you deduct your personal allowance. For example, it can be employment income, rental income, self-employment earnings, dividends, interest, pension income or income from a trust.
Next you need to look at the limits – if you and your partner both have an income of less than £50,000 a year each, there is no change to the system and you will still receive your Child Benefit. Just be aware that if your income increases, you may have to revisit your situation.
However, if either you or your partner has an income of more than £50,000 a year the highest earner will have to register for Self-Assessment via HM Revenue and Customs (HMRC), complete a self-assessment tax return and pay an income-dependant proportion of your Child Benefit back in income tax (known as the High Income Child Benefit Charge).
Where one or both partners are earning more than £50,000 but less than £60,000 you be required to payback 1% of your Child Benefit for every £100 of income earned over £50,000. If one or both partners are earning more than £60,000 you will have to pay back all of your Child Benefit.
When do you need to do what?!
If you earned more than £50,000 in the year to 5 April 2013, you will need to complete a tax return for 2012/13 and should have registered by 5 October 2013! You may well get a penalty if you register late so it is important to do this asap. Your tax return needs to be filed with HMRC by 31 January 2014.
If your income has increased after 5 April 2013, you will need to register to do a 2013/14 tax return and have until the beginning of October 2014 to register.
What if you don’t want to receive Child Benefit?
You can choose to stop receiving Child Benefit which will mean you don’t then have to complete a tax return (unless you are required to for another reason). To do this you need to contact HMRC and complete an online form.
Parents should still complete the Child Benefit claim form, even if they are going to opt to stop receiving it as doing so will mean you are then in the system to receive National Insurance credits that can protect your entitlement to a state pension. Registering also means your child will automatically be issued with a National Insurance number before their 16th birthday.
Need further help or advice?
Contact Gander Tax Services on 01730 711271. We can get you registered for self-assessment, prepare your tax returns and help with any other tax planning you may need – all for very reasonable fees!