Martin Lewis explains who is eligible for Child Benefit
Child Benefit is available to individuals who are responsible for raising a child under the age of 16, or under 20 if they remain in approved education or training. The payment is split into two rates, varying dependent on a child’s place in the family. But Britons should be aware of a somewhat complicated tax surrounding Child Benefit which first occurred in 2013.
This is known as the High Income Child Benefit Charge (HICBC), which can form part of Self Assessment, and may require families to pay some of the money they receive back to the Government.
It is important to take the charge into account, as the burden lies with the taxpayer to submit their tax return and be open with Her Majesty’s Revenue and Customs (HMRC) about the charge or potentially face a penalty.
Mike Parkes, Technical Director at GoSimpleTax, provided insight to Express.co.uk on the implications of Child Benefit.
He warned there are important considerations to bear in mind when thinking about the sum.
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He said: “With two weeks to go until this year’s Self Assessment tax deadline, people may not be aware that they need to complete a return if they, or their partner have received Child Benefit and either party has an annual income of more than £50,000.
“The way the system works is that if a couple are both on salaries of £49,999, they can receive the benefit, yet if a single parent is earning £60,000, this benefit would be cancelled out by the high-income charge.
“People who don’t fill in their Self Assessment tax return, because they’re not aware of the high-income benefit charge could be penalised by HMRC.”
However, the way the system works is complex, which could lead to problems for those looking to understand their tax implications.
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For this reason, it is important to set aside ample time to look at this before the deadline, as well as undertaking further research or calculations if necessary.
Mr Parkes continued: “There’s little wonder people are confused by this charge, as the way people earn their income is increasingly complex and multifaceted.
“The fact remains, if you are earning more than £50,000 and you have been claiming child benefit, you need to declare this in a Self Assessment.
“Your alternative is to opt out of Child Benefit, but it’s too late for that this year, and then you’re not require to file a Self Assessment unless you need to for other income.”
The tax charge for Child Benefit is likely to affect different people in varying ways.
This is due to differences in income, as well as familial circumstances, such as whether there are two parents or one looking after a child in the home.
But there can also be implications later down the line that many people fail to consider, such as the potential impact of the sum on state pension payments in retirement.
This is something Mr Parkes touched upon when he examined how a tax bill will be broken down for some.
He concluded: “As well as an overall imbalance, this charge can feel unfair because the high-income Child Benefit charge can have consequences for the lower earner in a couple, even though the liability of the tax charge falls on the higher earner.
“In situations where the tax charge applies, a family may decide not to claim Child Benefit.
“But this means that the lower earning individual may miss out on National Insurance credits, which help to build entitlement towards a state pension, meaning they pay the price in retirement.”
If in doubt, Mr Parkes recommended Britons use tools for Self Assessment to ensure they are paying exactly what they owe.
These tools will also allow people to see if they are receiving the tax reliefs they may be entitled to.
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