If you are worried you may have to pay back some of the child benefit you have been claiming then you should read on. Gone are the days where everyone is entitled to this benefit in full. This post explains who is entitled to claim child benefit, who is entitled to none and who may have to pay some back in the form of a tax charge. We also explain how to do this and the deadlines that are applicable to you.
Who is entitled to claim child benefit?
Everyone who is responsible for a child who is under 16 (or under 20 if in approved training/education) is entitled to claim child benefit. Only one person can get child benefit for a child. If you earn over £50,000 you may have to pay A tax charge. This is known as a ‘high income child benefit charge’.
What is a high income child benefit charge?
A high income child benefit charge is a tax charge that results in you having to pay back all or some of the child benefit that you or your partner have claimed. You may have to pay this charge if your income is over £50,000 and either you or your partner claim Child Benefit or someone else gets Child Benefit for a child living with you and they contribute at least an equal amount towards the child’s upkeep. It doesn’t matter if the child is yours or not.
I earn over 50k – What do I need to do?
The person who earns over £50,000 per year is responsible for declaring and paying this tax charge. The first thing you will need to do is register for self assessment (if you haven’t done so already). Once you have registered you will then need to declare how much you earned in the previous tax year – the tax year runs from April to April.
What are the deadlines?
There are strict deadlines and as this post is designed to help people every year and not just for 2016/17, we are giving guidance dates and not exact dates for every year (expect for 2016/17).
The deadlines are as follows:
Register for self assessment – Do this before the end of September and you will be Ok. (Deadline for 2016 is 05th October).
Tax return by post – This is due by the end of October (Midnight on 31st October for 2016).
Online tax return – Due by the end of January (31st January for 2017).
Pay the tax bill – By the end of January (31st January for 2017).
How much will I need to pay back?
The tax charge is incremental, this means that the amount you need to pay back increases the more over £50,000 that you earn. Every one thousand pound that you or your partner earn over £50,000 will result in you having to pay back 10% of the total amount of child benefit you or your partner received that financial year. For example (and in the most simplest terms), if you claimed child benefit for one child, for the whole tax year (a total of £1097.10 for 2015/16) and your salary (minus anything that comes out before tax such as some pensions, gift aid donations, cycle schemes etc) was £51,000, you would need to pay back £109.00 – this is 10% of the child benefit you or your partner claimed. If you earned £59,000 and were in the same situation as above, you would need to pay back £987.00 (this is 90% of the total child benefit claimed).
Is it worth claiming child benefit in the first place?
Clearly, the closer to earning £60,000 you are, the more you are going to have to pay back. Firstly, you should be aware of this and plan for it. The last thing anyone needs is a huge tax bill. You may choose not to get Child Benefit payments, but you should still fill in the claim form because it will help you get National Insurance credits which count towards your State Pension and will ensure your child is registered to get a National Insurance number when they are 16 years old.
Alternatively, you can continue to claim the child benefit, knowing you are going to have to pay most of it back, but keep it in a high interest rate account for as long as possible. You can at least make the money work for you before you give it back.
I hope this post has helped make a little sense of the tax return system for child benefit payments!