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Tax problems during major life events

Monday December 2019

OTS. The Office of Tax Simplification (OTS) has completed a report on tax problems that can arise as a result of major turning points in life. The report (see link below) looks at the tax implications of events like starting work, changing jobs or multiple jobs; saving for and drawing pensions; tax education; helping others with tax.

HICBC. The high income child benefit charge (HICBC) applies if either partner in a couple has adjusted net income of £50,000 or more per year and they, or their partner, receive child benefit. It’s not always appreciated that HICBC kicks in if someone else gets child benefit for a child living with you, and they contribute at least an equal amount towards the child’s upkeep, so watch out for divorce or break-up situations. Clients subject to the HICBC lose 1% of the full award for each £100 income between £50,000 and £60,000. Once income exceeds £60,000, the charge recoups the award in full.

Opt out? This means some parents opt out altogether. But as the OTS highlights, there’s more to a child benefit claim than payment. Until a child is twelve, claimants get NI credits, building up state pension entitlement. A claim is also the route to automatic issue of a child’s NI number later. The OTS recommends streamlining NI aspects but at present making a claim, followed by an election not to receive, is the only way to avoid the HICBC, but keep NI credits and ensure the child’s NI number is automatically issued later on.

Published by Tax for Professionals, Indicator FL Memo

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