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Are you benefitting from your child benefit?

Posted on by Joanne Curwen

From the 2013/14 tax year if your income is in excess of £60,000 all of the child benefit you have received during the year will have to be repaid in higher tax charges. Child benefit can be a useful tax-free handout from the government. In 2013/14 qualifying parents will receive £1,055.60 for the first child and £696.80 for any additional children. Child benefit is payable up to the age of 20 if the child continues in full time education, so (not allowing for inflation) it could potentially total more than £20,000 of tax-free money. Where your total income falls between £50,000 and £60,000 in the 2013/14 tax year, child benefit is tapered away by 1% for every £100 you are over the £50,000 threshold. So let’s say for example your total income for the year was £53,500 in 2013/14 and you received child benefit during the year. You would have to pay an additional tax charge of 35% of the child benefit you received, this is paid through your self-assessment tax return. This effectively increases the rate of taxation on dividends taken between £50,000 and £60,000. So obviously if you are in receipt of child benefit there is some motivation to ensure that your income does not fall between these thresholds. If this is the case there are things you can do such as gifting shares in your company to your spouse, retaining some profits within the company to ensure your dividends stay below a certain level or pension contributions. If you are certain your income will be in excess of £60,000 and you are in receipt of child benefit you can opt out of receiving child benefit completely to ensure that you do not have a tax charge when you submit your personal tax return.

Simplyco are expert contractor accountants and give the best advice around to their clients. To enquire about our services, please give us a call on 01900 898 440 or email

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