Child Benefit Cuts May Affect Some Trust Deeds

7th October 2010

Child benefit has traditionally been paid on a universal basis; any family with children has received the payment irrespective of income or need. These payments can be substantial. The eldest child receives £20.30 per week and a further £13.40 per week is paid for each additional child. For a family with three children this amounts to around £204 per calendar month.

From 2013 this benefit will be withdrawn if any parent within the household earns enough to have to pay the higher 40% tax rate (currently around £44000 per annum).

Over recent years an increasing number of middle and higher earners have found themselves experiencing difficulties with personal debt. Some have had no option other than to enter into debt solutions such as protected trust deeds and debt management plans. As economic conditions remain tough many more will need to do so before 2013.

Individuals in such circumstances who have children and are considering trust deeds may experience a very significant drop in income in 2013. Protected trust deeds normally last for three years so those considering the option today are likely to be affected later on in their trust deed.

Some forethought and foresight should be used in such a situation. Any predictable change in future income should be brought to the attention of the debt solution provider before signing up and going ahead with the agreement. In particular, anyone considering a protected trust deed, and who will be affected by the child benefit changes should certainly obtain confirmation as to how this will be dealt with when the changes occur.

A failure to deal with this issue prior to going ahead with a trust deed could lead to significant problems with the agreement further down the line.

For further Trust Deed or Protected Trust Deed information please visit our forum where we have a wealth of free advice from experienced industry experts.

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