300,000 in dark on Child Benefit cuts

WHAT'S GONE WRONG?
The first thing to say is that the 300,000 who have had warning letters are still going to be paid their child benefit when the cuts kick in next week.

It's just that they may have to pay it back later, and fill in a tax return so it can be taken back through the tax system.

Here's the situation...

If one of you in the home earns £50,000 or more the tax office will start clawing back any child benefit being claimed. And if you earn over £60,000 they will take it all back.

Revenue and Customs estimate that 1.1m households will be affected.

But they've only written to 800,000 warning them, so 300,000 may not have heard, though the Revenue says they should have seen adverts.

WHAT SHOULD PEOPLE DO ABOUT IT?
If you know you're earning so much you'll never be able to keep your Child Benefit, you can simply opt out and save yourself the trouble of doing extra paperwork in future.

170,000 have done that already. You need to opt out by Sunday night to be sure that you've made a clean break and won't have to enter the benefit in a Self Assessment tax return.

If you're not sure - you can just carry on receiving Child Benefit but the high earner in the household will need to fill in a tax return, declaring the money.

Then it'll be clawed back during the following year, in most cases as part of the monthly tax deduction from wages.

There's plenty of time to fill in the form but there is a deadline. For this tax year, it has to be in by the end of January 2014 if you do it online.

You could be fined if the form doesn't arrive.

Let's hear it for the cash economy!

Just because you ask to be paid in cash doesn't mean you're a tax dodger.

Remember, there are hundreds of thousands of businesses, perhaps even more, which don't have to charge VAT. Their income doesn't breach the threshold of £77,000 a year.

And there are plenty of people who do one-off jobs - babysitters, dog walkers and small traders - for whom it's convenient to be paid in cash.

Many of them don't have to pay tax at all because their income doesn't breach the annual tax-free allowance of £8,105.

And you don't have to feel guilty for paying cash to people like this - or that it's "morally wrong", as the Treasury minister, David Gauke put it.

In fact we need cash moving around the economy, the faster the better.

Just to be clear about the rights and wrongs, this warning about paying in cash, along with a form to report suspect tax dodgers, sets out the view of the tax people at HMRC.