Q. I have just been awarded a pay increase which takes my salary to £54,000. We have 2 children and my wife gets child benefit for them, which I understand that we will now lose. Is there anything we can do to retain this benefit?
A. The High Income Child Benefit Charge was introduced on 7th January 2013, and effectively claws back some of the child benefit received by the family, based on the “adjusted net income” of the higher earning partner. This is your total taxable income less the gross value of any gift aid contributions or pension contributions which have received relief at source. Based on the current year, your wife will be receiving Child Benefit of £20.50per week for the first child, and £13.55 per week for the second, a total of £1,770.60 for the year. The High Income Child Benefit Charge is 1% of this figure for each £100 by which your adjusted net income for the tax year exceeds £50,000, meaning it is effectively full lost only when your income is over £60,000. This is measured by tax year. You do not say exactly when your salary increased to its current level (congratulations, by the way!), or what the previous level was. However it is possible that if the increase was from July, then your earnings in the whole tax year may not exceed the £50,000 level, particularly if you take into account charitable donations and any pension contributions you pay (remember you can also claim higher rate income tax relief on these). Even if you have none of these deductions, and your income has been £54,000 throughout the year, the tax charge will be 40% of the amount your wife receives, or £708.24. You might therefore want to consider making a pension contribution or gift aid donation up to £4,000, which would cost £3,200 initially (net of basic rate tax), but would ultimately only cost £1,692, after 40% tax relief and the saving in High Income Child Benefit Charge, an effective rate of tax relief overall of over 57%.
Q. My grandson has a Junior Individual Savings Account which his parents set up for him when he was 13, and we have contributed to as well. He is now 16. Can we access the money as the school is organising a “World Challenge” trip to India next year, which he would really like to go on. It also seems to be the sort of thing we gave him the money for, as it is one of those opportunities which should really bring him out of himself and give him confidence.
A. It is not possible to access the funds in either a Child Trust fund or a Junior ISA until the age of 18, except in the case of terminal illness or death. Once your grandson turns 18, it will become an adult ISA and he will be able to access the fund. In the meantime, he can manage the investments within the JISA from 16, but without being able to withdraw funds. The World Challenge trip is an opportunity to travel to a different part of the world, and experience different cultures, usually doing some good work in the place they are visiting. Part of the process is that the young people participating in the trip are encouraged to raise the funds themselves, and thereby recognise the value of the opportunity, so perhaps it will add to the experience if your grandson puts the work in to raise the funds to cover the cost.
If you have a question you would like Trevor to answer, please email it to: yourmoney@rwpfg.co.uk or post it to Your Money, Rutherford Wilkinson Ltd, Northumbria House, 21-23 Brenkley Way, Blezard Business Park, Newcastle upon Tyne, NE13 6DS.
0191 217 3340
