Some parents could face a child benefit tax bill
— and HMRC are on the lookout, warns Paul Lewis
Thousands more parents could get a surprise tax bill this year – including fines for not paying. Since 2013 any person whose income tops £50,099, and who either gets child benefit or is the partner of someone who does, has been liable to pay a tax that effectively takes some or all of the child benefit back.
That limit has not changed since it was introduced. So as wages rise, more parents are caught in the child benefit tax trap. Perhaps as many as one in five are liable for it, often without knowing. And HMRC is looking for them.
The rules for Child Benefit High Income Charge are weird. It applies to the partner with the higher income or to the income of a parent living alone. If it’s £60,000 or more, they pay a charge equal to the whole of the child benefit they (or their partner) receive. It doesn’t matter if they’re not the parent of the children. The partner with the higher income pays. The biological parent has no liability if they don’t get child benefit or live with the parent who does.
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The joint income of the couple is not relevant. If one partner earns £60,000 and the other nothing, the full charge applies. But if they each earn £50,000 it doesn’t, even though their joint income is £100,000.
The tax is levied on a sliding scale between £50,000 and £60,000. You can reduce the charge or even avoid it by paying more into your pension or to charity – the amount you pay is deducted from your income. But beware if you have a company car. The benefits from that are added to your income and can take it into the tax zone.
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The person who is liable must tell HMRC by 1 October after that first happens. They must then complete an annual self-assessment tax return. To avoid that hassle, the person getting the child benefit can give it up – but should claim it first to keep National Insurance credits that come with it and ensure a child who reaches 16 gets a National Insurance number promptly.
For more information, search gov.uk for “child benefit tax charge”.
QUESTIONS? Send any questions to Paul.Lewis@radiotimes.com. Paul cannot answer you personally, but will reflect them in his column.