Posted on 24th July 2013

Earning between £50,000 and £60,000 means you must repay some or all of your child benefit. You could opt out entirely, but is that sensible?

Opting out of receiving child benefit means losing the whole entitlement, so you might not want to consider it unless you earn £60,000 or more.

The rules around child benefit have changed. From now on, instead of being a universal benefit that all families receive, regardless of income, it has become means-tested.

But rather than simply stopping the benefit for families earning more than a certain amount, the government has introduced a tax charge. All families can still claim and receive child benefit, but anyone earning more than £50,000 a year will be forced to repay some of it in a tax charge. Anyone earning £60,000 must repay their entire entitlement.

Not everyone will want to receive the money then repay it through a self-assessment form, so the government has allowed people to opt out of getting the cash. Opting out means missing out on the whole entitlement so you probably won't want to consider it unless you earn £60,000 or more. Midnight on 6 January was the deadline for opting out and making sure you don't receive any payments under the new regime. But if you missed that deadline, don't panic.

If you do want to opt out rather than going through the hassle of self-assessment, it probably isn't too late to do so. Unless your child benefit payment went into your account today you can probably opt out in time to stop it. Call HM Revenue & Customs on 0845 302 1444 to do so.

If you have received a payment, you can still opt out – you can do so at any time. However, you will need to fill in a self-assessment form in time for 31 January 2014 and repay any money you have received. If you are already in the self-assessment system, missing the deadline will have added minimum hassle – you just need to make sure you can afford to repay the benefits you have received.

There are circumstances in which it makes sense not to opt out. If your income is on the border of £60,000 and you can't be sure you will definitely earn more in this tax year or the next, you might be wise to keep hold of it. If you have opted out and your circumstances change you can opt back in. But if you find at the end of the tax year that you didn't go through the threshold you cannot apply for the money in arrears.

Rather than cancel you could stick it in a savings account each month so it is there when the time comes to pay your tax bill. Benefits received between April 2013 and April 2014 will not need to be declared until January 2015, and in the meantime they could earn you some (although not very much) interest.

The same is true if you think you might see your income fall for any reason – perhaps because you are planning to have another child, or because your work is looking unstable. If you can be disciplined enough to keep the money in a savings account until you need it for the tax bill, you might prefer to do that.

You might also take the view that the system could change with any change of government. The Labour party has not indicated what it intends to do if it wins the next election, but it has said it thinks it is unfair that couples earning £49,000 each can receive the whole benefit, while families with one high earner and one full-time carer lose it entirely, so it might make some changes to the system.

However, charges for the 2012/13 and 2013/2014 tax years will be made before the next general election is set to take place, so this is not a short-term strategy.

If you need further advise or unsure wether these changes will effect you, please contact JNR Accounting today on 07716886261 or email us [email protected] and we will be able to help you.