HM Revenue and Customs are currently sending out letters to all high income claimants of child benefit advising them of changes which come into effect from 7 January 2013. As already discussed in an earlier blog, those affected will be couples where the higher earner has income in excess of £50,000 per year.

If you fall into this category then your entitlement to some or all of the benefit will be removed and you will be given the choice of either not claiming the benefit at all or claiming the benefit and then paying back any overpaid amount through your self-assessment tax return.

It is clear from recent press coverage that this subject has caused a lot emotional response. Views expressed range from those who think it morally wrong that wealthy individuals should be receiving any benefits to those who see child benefit as a just recognition of the contribution to society of bringing up children?

Whatever your view, the practical question is whether to forgo the benefit completely or to claim and pay back any overpayment?

If you know your income is going to exceed £60,000 there seems little point in claiming only to have to pay back the whole lot later. If you are in the middle ground with income between £50,000 and £60,000 you will remain entitled to some benefit, or your income may be not ascertainable until after the end of the tax year. Unlike income tax which can generally be sorted out after the year end, claims for benefits general can only be backdated three months. Waiting until after the end of the year will therefore be too late.

Leaving aside the moral arguments it would seem sensible to claim if you know your income will be less than £60,000 or are uncertain but think it may be. There may be circumstances where claiming is not the best approach. If for example you do not already submit a self-assessment tax return you will be required to complete one to declare any amount overclaimed and if you need the help of a tax agent then costs are likely to significantly eat into any benefit entitlement. Or, if you are the sort of person who spends the money you have then it may be difficult to find the funds to pay back any overpaid amount at later date.

One thing I can be certain of and that is as a recipient of child benefit myself, I have got used to the cheque landing in my bank account every month and I am not looking forward to losing it!

As always, if you have any queries regarding the above matter or are uncertain how it will affect you then please contact your usual client partner or a member of our tax team.