Date posted: 10th Sep 2021
The child benefit charge was introduced in 2013, for those individuals with income of over £50,000.
The basic idea behind the charge is that if your income is over £50,000, then you will be required to repay some or all of the child benefit received, to HMRC by completing a tax return. Once your income is over £60,000, you lose your entitlement to child benefit.
In calculating whether the £50,000 threshold is breached, you need to take into account earned income, investment income (dividends, interest etc), property income and so forth. There are also potential deductions you can make if you contribute to a personal pension or make charitable donations.
However, whilst salaries and other tax bands have risen since 2013, there has been no increase in the £50,000 starting point, for considering whether any child benefit is repayable to HMRC.
In 2012/13, HMRC wrote to most taxpayers to warn them of the introduction of the new child benefit charge. However, if you earned below £50,000 then it is unlikely that you would have received a letter from HMRC so you may be completely unaware of the charge. If your income has increased to over £50,000, since 2013, then you may be unknowingly due to pay back some of the child benefit received, to HMRC. Conversely, if your income has decreased below £60,000 and you stopped receiving child benefit when the new rules came into force, then perhaps you should consider whether you need to start claiming the benefit again.
If you have become a parent since 2012/13, then you may be completely unaware of these rules and need to take some action to correct your tax returns.
If you have any queries regarding child benefit reporting, please give us a call or contact us here.