Ask The Taxwise Expert: The High Income Child Benefit Charge

Peninsula Team

October 14 2013

I have recently received a letter from HMRC regarding Child Benefit, I earn just over £55,000 (salary and benefits combined) in the 2012/13 tax year and my income is dealt through PAYE, what must I do? Following Chancellor George Osborne’s announcement in the 2012 budget an amended plan to steadily restrict child benefit from families where one parent earns over £50,000 was introduced. This includes situations where a parent has an individual income of over £50,000 and lives (or has lived) with a partner who's entitled to receive Child Benefit. The benefit received will be recouped gradually as the income of the highest earning parent rises above £50,000, with the child benefit being eroded completely once their income is £60,000 or more. The benefit will be recouped by way of self-assessment. This change took effect from 7 January 2013 and will therefore affect individuals in the tax year from 2012/13 onwards. It is expected that the change will bring approximately 1.2 million people who would have been handled through employers PAYE into self-assessment, with the majority of the individuals having never been required to register for self-assessment in the past. It is estimated that HMRC has written to around 2 million higher rate tax payers reminding them that if they earn between £50,000 and £60,000 in both salary and benefits combined and they or their partner received child benefit in 2012/13 they will need to register for self-assessment and pay the High Income Child Benefit Charge. If you qualify in the above and are not already registered for Self-Assessment (your income is dealt through your employers PAYE system), ideally you should have registered for self-assessment before 5 October 2013, if you have not already done so we would suggest that you register as soon as possible making sure that a return and the relevant liability had been passed to HMRC before 31 January 2014, or risk encountering HMRC penalties for late filing and non-compliance.  You will need to fill in the online form SA1 Registering for Self- Assessment. The High Income Benefit charge has been widely criticised as parents who both earn just less than £50,000 get to keep their Child Benefit where families where one individual earns over £50,000 are penalised, it is expected that this bone of contention with innocent families will be removed in coming years by the Chancellor.  However as this has not yet been announced we need to act and protect both ourselves and where relevant our employees from a potential penalty situation. Failure to comply will result in late filing penalties being issued by HMRC which start at £100 and can increase to 100% of the tax due depending on whether the failure was intentional. You may find the following link useful regarding The High Income Benefit Charge

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