Tax returns: make sure you declare child benefit

If you owe HMRC a repayment of child benefit cash, you need to act quickly, says Ruth Jackson-Kirby.

As the deadline for tax returns approaches, families should check whether they owe HMRC child benefit. In 2013 the High Income Child Benefit Charge was introduced. If you receive child benefit and you, or your partner, earns more than £50,000 a year, you have to repay some or all of the money. The taxpayer must “submit a tax return and notify HMRC they are liable for the charge,” says Harry Brennan in The Daily Telegraph. “Families face fines for failing to declare, even if they have never done their own taxes before.”

The High Income Child Benefit Charge is calculated on a sliding scale and equates to 1% of the child benefit for every £100 you earn over £50,000. If you earn £55,000 you have to repay half the child benefit you have received for that tax year. If you earn £60,000 or more, you need to pay HMRC the full amount. “Every year the high-income charge catches out thousands of families who are either unaware of it or who find themselves unwittingly earning more than they thought,” notes Miles Brignall in The Guardian.

If you earn just under £50,000 check your actual income carefully as you may find that the value of benefits you receive from your company, such as a company car or private medical insurance, push your earnings over £50,000. You can check this on your P60 and P11D forms.

Anyone subject to the High Income Child Benefit Charge in 2019-2020 needs to fill in a self-assessment form and file it by 31 January. You also need to repay any child benefit owed by then. Failure to do either of these things could result in a fine.

“The £50,000 threshold hasn’t changed since 2013 [so] more and more families are being caught as incomes increase,” Sean McCann of NFU Mutual told The Daily Telegraph. “Many will be unaware of this extra tax and the penalties for failing to declare and pay on time.” 

Many families choose to avoid the hassle of repaying child benefit and simply opt out of receiving it in the first place. But this can lead to complications. If you aren’t working because you are looking after children and you claim child benefit, you also receive National Insurance credits. You need 35 years of National Insurance credits to receive a full state pension, so opting out of child benefit could leave you with a diminished pension when you eventually retire. You can avoid this problem by filling in the form to claim child benefits – and trigger the National Insurance credits – then simply tick a box to say you do not want to receive payments.

In a year when many people’s incomes have dipped you should also consider opting back into receiving child benefit if your income has fallen below £60,000. You can restart payments by completing an online form at Gov.uk. Do this “as soon as possible – not only on tax reporting deadline day – and you can only backdate payment for three months, so it is even more vital to do this right away,” says David Byers in The Times.

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