Child Benefit in many cases is not a taxable payment, however, in certain circumstances parents and carers will have to meet a tax charge. This occurs if a person’s income is over £50,000 which triggers tax. It tapers upwards until income reaches £60,000 – at which point 100 percent of the benefit must be repaid. However, some have expressed Mr Sunak could reconsider the position on the matter in his Budget this week.
Jonathan Yeomans, Head of Tax at untied, a personal tax app, said: “The Chancellor could increase the threshold above which Child Benefit starts to be withdrawn from those who are classed as high earners.
“This is what is known as the High Income Child Benefit Charge or HICBC.
“This charge applies to anyone with income over £50,000 if they or their partner receive Child Benefit.
“However, this £50,000 threshold was introduced in January 2013, and it has never been increased.
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“In 2013, average earnings in the UK were £27,000, but these are now around £31,500.
“This threshold is, therefore, long overdue an increase, and it unfairly penalises one-income families.
“Hopefully, the Chancellor will look at this in his Autumn Budget.”
If a person wishes to work out whether the HICBC will apply to them, they will need to work out what is known as their “adjusted net income”.
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The adjusted net income is their total taxable income before any personal allowances and less things like Gift Aid.
If a person’s income is over £50,000 and their partner’s is also, then whoever has the higher income is responsible for paying the charge.
A partner is someone an individual is not permanently separated from, who they are married to, in a civil partnership with, or living with as if they were.
Those who have an income over the threshold will face a tough choice about Child Benefit.
They can choose to either get Child Benefit payments and pay any tax charge at then end of each tax year, or choose to forego Child Benefit altogether and not pay the tax charge.
Individuals who choose not to get Child Benefit can still fill in the claim form, but must state they do not want to get payments.
Filling in the form can help Britons to get National Insurance credits which could count towards the state pension.
Furthermore, this action ensures a child will immediately get their National Insurance number automatically before they turn 16 – otherwise they will need to apply for one themselves.
To pay the HICBC, people will need to register for Self Assessment, and then fill in a Self Assessment tax return.
Those who do not usually send a tax return will need to register by October 5 following the tax year they need to pay the tax charge.
People should be aware they can get a penalty if they do not register for Self Assessment or do not declare Child Benefit on their Self Assessment tax return.
Parents and carers will get a letter telling them what to do next after they have registered.