High Income Child Benefit Charge

February 15th, 2018 | Posted in Self Assessment, Tax Planning

YThe ‘High Income Child Benefit Charge’ (HICBC) means that high earning parents are entitled to either a reduced child benefit or no benefit at all.  This affects those families where one parent earns £50,000 or more from ‘adjusted net income’, which includes all sources of taxable income less any pension contributions and charitable donations made under the gift aid scheme.

A household that receives child benefit between 6 April 2019 and 5 April 2020 where one parent earns £50,000 or more may need to pay some or all of the child benefit back.  If a parent earns £60,000 or more then all of the child benefit must be paid back. The parent with the higher income would need to pay the child benefit back by completing a 2019/20 tax return even if it was the lower earning parent that actually received the benefit. 

The deadline for submitting the tax return and paying any tax due to HMRC is 31 January 2021.  However, those individuals that have not needed to complete a tax return in the past will first need to register for self assessment. HMRC must be notified of the need to complete a 2019/20 tax return by 5 October 2020 to avoid having to pay a penalty.

The charge is not applicable to households for the 2019/20 tax year if they opted out of child benefit before 6 April 2019 or those in which no individual earns more than £50,000.  Individuals that know they won’t be entitled to any child benefit for the next 2020/21 tax year may wish to opt out of the payments by 5 April 2020 to avoid having to file a 2020/21 tax return and repaying the tax.  Note that we always recommend filling in the child benefit claim form for each child and then opting out of payments as the initial child benefit registration provides national insurance credits to the parent making the claim, which counts towards state pension eligibility.  Claiming child benefit also means that the child will automatically receive their national insurance number once they turn 16 rather than having to remember to apply for one.

 

No Self Assessment late filing penalty for those who file online by 28 February BUT interest will be charged on any tax not paid by the 31 January 2021 deadline https://bit.ly/39g2kOg

VAT deferred between 20 March & 30 June 2020 can either be paid in full by 31 March 2021 OR by up to 11 smaller interest-free instalments made by the end of March 2022. More information released by HMRC here https://bit.ly/2JurqP9

ICAEW CharteredAccountants BLK RGB copy
QB Advanced Certification logo
Xero Logo Blue