Child benefit cuts

Millions of parents will be getting a letter within the next month from HM Revenue and Customs spelling out how their child benefit could be cut.

Households where at least one person earns more than £50,000 will have the benefit effectively reduced or stopped.

Tax officials say the changes could mean up to 500,000 parents having to complete self-assessment tax forms.

The cuts are needed to ensure the better off do their bit to reduce the deficit, ministers say.

A spokesman for Her Majesty's Revenue and Customs (HMRC) said the exact details of what would be in the letters was still being worked out.

But parents will be asked to declare if they, or someone else in the household, earns over the £50,000 level.

They can then choose either to stop receiving the benefit, or choose to continue to receive child benefit with the money clawed back via the tax system.

The "clawback" option will see the highest earner over £50,000 in a child benefit household paying an "income tax charge" equivalent to some or all of the amount they currently get.

The benefit received will be recouped gradually as the income rises above £50,000, with the child benefit being eroded completely once their income is £60,000 or more.

The change is due to come into force on 7 January, 2013. For someone with two children earning £60,000 a year it is the equivalent of a 4.5% pay cut.