Child Benefit to be Axed for High Rate Taxpayers

6 October 2010

The Chancellor has announced that families where at least one parent is a higher rate tax payer will lose their right to receive child benefit from 2013.

This attempt to reduce the Government's deficit has been heavily criticised because you could have a scenario where both parents are working but neither is a higher rate tax payer but combined they could earn £70-£80,000 per year and still be entitled to child benefit. While another family where one partner earns £45,000 per year and the other partner isn't working would lose their benefit.

Contractors working through their own limited company may try and avoid this loss by income shifting between husband and wife. This process enables the total income to be split between both partners and could therefore keep both partners under the higher rate tax band.

It would therefore seem that this proposal needs review to esnure it is fairly applied.