A review of who is awarded child benefit may result in those who receive occupational perks, for example a company car, having their child benefit stopped or reduced.
From January 7th 2013, full child benefit will only be applicable to families where neither partner has an adjusted net income of more than £50,000. When at least one partner earns between £50,000 and £60,000, child benefit will be reduced accordingly, and any couple where one partner has adjusted net income of more than £60,000 will no longer be entitled to any child benefit.
It is the use of the term ‘adjusted net income’ which could possibly confuse people. It may be assumed that because no one in the home earns a basic salary of over £50,000, then the changes won’t affect them. Child benefit, however, will be calculated on the basis of total earnings, not your headline salary. Private healthcare, company cars, and bonuses provided by your employer will be included when working out your income and, subsequently, the amount of child benefit awarded to you. For example, a parent on a salary of £45,000, who has a company car with a notional value of £6,000, will be taken over the limit of earnings where child benefit is unaffected.
There are, however, ways of reducing the income relevant for the calculation of child benefit. It is possible that, in some cases, people could keep hold of their child benefit by increasing pension contributions and gift aid enough to reduce their adjusted net incomes to below £50,000.
It is also worth remembering that a family with two earners just below the threshold, potentially earning £100,000, will be unaffected by these cuts.