ACCA Applied Skills · Taxation (UK) · The scope of income tax
Dana has income of £70,000 and her partner receives child benefit of £2,000 for the year. The child benefit income tax charge applies to Dana as the higher earner. What is the charge?
The charge is £1,000. Income exceeds £60,000 by £10,000, which is 50 steps of £200, so 50% of the £2,000 child benefit received is charged to income tax.
- A£2,000
- B£1,000Correct
- C£500
- D£100
Explanation
Income over £60,000 is £10,000. The charge is 1% of child benefit for every £200, so £10,000 ÷ £200 = 50 steps, giving 50% × £2,000 = £1,000. £2,000 would be the full clawback that applies only at £80,000.
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