Old Mill warn - don't get caught in child benefit trap

YEOVIL families are being warned not to get caught out in the child benefit trap now that controversial changes into how it is paid have come into force.

Previously paid to the parent or carer of every child, at £ 20.30 per week paid for the eldest child (£1,055 pa) and £13.40 per week for each subsequent child (£697 pa), child benefit has now been reduced for those earning more than £50,000.

For those earning an income of more than £60,000, a tax charge will be incurred which removes the benefit of receiving Child Benefit altogether, and where income is between £50,000 and £60,000 the charge will be 1% of the total benefit for every £100 of income over £50,000.

PHOTO: Julia Banwell, director and chartered financial planner at Old Mill accountants.

The reason the change has caused so much controversy is because it is calculated on the highest earner, not the combined household income, and that means it will affect thousands of families in the West Country.

Julia Banwell, director and chartered financial planner at Yeovil-based accountants Old Mill, said: “Under the new rules, which came into effect on January 7, if one parent earns over £50,000 then some of the benefit will have to be paid back, if he or she earns over £60,000 it will have to be paid back in full. But, if both parents earn £49,000, then they will continue to be entitled to receive the full amount of child benefit paid.”

This means that a family where only one parent works, but earns £60,000, will lose all of its child benefit, while another family where both parents earn £49,000 - a combined income of £98,000 - will continue to receive the full benefit.”

Julia added: “While there is nothing that can be done to change the controversial new rules, there are some simple steps that can be taken. For example, if your employer runs a salary sacrifice scheme which enables you to replace taxable earnings with non-taxable benefits, such as childcare vouchers or other health scheme benefits, it may be possible to effectively reduce your salary to less than £50,000.

“You could also increase your pension contributions to reduce your taxable income. As well as potentially taking your salary below the £50,000 threshold, you could also benefit from the long-term benefit of saving more for your retirement.”

To find out more about how Child benefit changes affect you, contact Old Mill on 01749 343366 or email sheptonmallet@oldmillgroup.co.uk.