Woman holding young child looking at child care allowance letterQ: How do the new child benefit rules affect me?

A: From today, all households where one parent has an income of more than £60,000 will no longer be entitled to child benefit. Parents earning between £50,000 and £60,000 will be given a reduced benefit payment.

This change is going to affect about 1.2 million families and, for those with two children, this could mean losing up to £1,752 a year.

Towards the end of last year, households where one or more adults earn more than £50,000 should have received a letter explaining more about these cuts.

However, 300,000 families who will be affected have still not received their letter and the date for opting out of the scheme is now passed. This means they will still receive the benefit but have to fill out a self-assessment tax form at the end of the year and pay all or some of it back.

The calculations are made from your ‘net-adjusted income’, which is your income (salary, company car, shares, bonus etc) minus your salary deductions such as childcare vouchers, gift aid and pension contributions.

If you and your partner both earn under £50,000, you won’t lose your benefit. If you earn slightly over £50,000 and haven’t opted out, there are a few ways to make sure you keep your whole benefit:

1) Contribute more to your pension. If you earn, say £53,000, you could contribute just over £3,000 into a pension and your net-adjusted income will be low enough to avoid the child benefit tax charge.

2) Take a proportion of your salary as childcare vouchers, which come tax and National Insurance free. If you join now, higher rate tax payers can opt to take a maximum of £124 a month in childcare vouchers, which can be used to pay for pre-schools, nurseries, after school clubs and holiday clubs. The childcare voucher deduction will lower your net-adjusted income and therefore increase the benefit you will be paid.

If you are still confused about the cuts and if the will affect you, contact the tax office at hmrc.gov.uk and get the full rundown.

Andrea Ventress. money expert

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