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Tax experts today welcomed a decision to allow parents to receive child benefit if they stop the payments but then find their income is lower than expected.
More detail about controversial changes to the benefit were revealed today as the HM Revenue & Customs began writing to parents.
A million letters have been sent to families today warning they are to lose some of their child benefit, which is worth 20.30 a week for the first child and 13.40 for each child after that.
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Changes: One million families have been warned they are to lose some of their child benefit
From January, any household where a parent earns more than 60,000 will lose all entitlement to child benefit, worth 2,450 a year to a family with three children. Those earning between 50,000 and 60,000 will lose some of it with the earners in question now required to fill in a self-assessment form.
Taxpayers who want to stop receiving the payments will not need to fill in an SA form but they must let HMRC know to stop payments before January 7.
But the plans, which should save the Government 1.7billion a year, have attracted widespread for criticism for their complexity.
With a growing number of workers in flexible arrangements or working as contractors, some may give up the benefit only to find they could have been eligible, due to a year of weaker earnings.
The Chartered Institute of Taxation (CIOT) has welcomed the taxman's clarity that such taxpayers 'would be able to restart their payments if their circumstances change'.
Patrick Stevens, President of the CIOT, said: 'There has been extensive confusion over the new child benefit charge, partly because of the way the legislation has been produced and partly because of the options available. Parents in receipt of child benefit, uncertain of their or their partner's future income, have been struggling to decide what action to take by 7 January when the new rules start. The material published today should help parents make decisions.'
HMRC has said will now cancel their election to stop payments, pay the child benefit and, depending on where the income is between 50,000 and 60,000, the higher income person will pay the partial charge back through self-assessment.
But concerns remain that HMRC, already under pressure from a growing workload amid a programme of redundancies, will face enormous strain when the new system begins in the new year.
A rush to reduce taxable income is also expected. Taxpayers can cut their declared earnings by putting more money into pensions. Childcare vouchers are another way of reducing income and possibly keeping all or some child benefit.
It also claimed today that an overwhelming majority of voters support Government plans to cut child benefit for high-earning families.
According to private polling commissioned by the Conservative Party, 82 per cent backed the move, which will hit the top 15 per cent of earners on 50,000 or more and end the principle of universal entitlement to child benefit.
The change was even supported by large majorities of families with children and people on high incomes. Among households earning 69,000 or more, 74 per cent were in favour, compared to 82 per cent of those earning 55-69,000 and 80 per cent of those earning 41-55,000. Strongest support, at 89 per cent, was found in households with a total income of 14-21,000.
• Read the new guidelines: http://www.hmrc.gov.uk/childbenefitcharge/
'MOVING IN WITH A WOMAN WITH THREE CHILDREN COULD LAND YOU A TAX BILL OF 2,449' ... FOUR QUIRKY PROBLEMS WITH THE CHILD BENEFIT CHANGES
The child benefit plans, which were changed in the Budget in March, have attracted plenty of criticism.
Originally, the benefit would be stripped from any household where someone was a higher-rate taxpayer – on a salary of around 43,000.
The decision was made to ease the cliff-edge effect, phasing it in between 50,000 and 60,000 of salary.
Here, Sean McCann, personal finance specialist at financial services group NFU Mutual, flags up some problems that could emerge in the new year.
1. 'Partner' is a very broad term, including married couples, civil partners as well as co-habiting couples. It's going to be difficult for the HMRC to keep track particularly couples who live together temporarily, or
those who do not accurately declare their status on a tax return.
2. The new rules could store up some nasty surprises. For instance, if a person with an income of over 60k were to move in with someone with three children then they could be landed with a tax bill of 2,449.20.
3. Another major consideration is that, due to the new changes, some parents may decide no longer to claim child benefit. Where one of them is a stay-at-home parent, they need to be careful that they don't lose out when it comes to their state pension as a result. This is because for each
week the stay at home parent is entitled to Child benefit, they qualify for a National Insurance credit, which contributes towards their basic state pension entitlement, up until the youngest child is aged 12. If they have another child and do not re-register for child benefit then they will lose
out.
4. The truth is that many couples don't share information about their income and finances, yet this co-operation is essential to the success of the new measures. For instance, if each partner has an income of over 50,000, then the one with the higher income will be required to pay additional tax to repay child benefit.
VIDEO: Government plan to cut child benefit for those earning more than 50,000
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