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 Accounting News & Insights

Child Benefit Tax Charge - Do you need to complete a tax return?

9th May 2014

The High Income Child Benefit Charge (HICBC) was introduced as from 7 January 2013 for parents on higher incomes who continue to receive child benefit (CB) payments.

Whether you are in agreement or not, HMRC has been asked to administer the collection of the HICBC and in doing so, has put thousands more people into self assessment (SA).  Parents on higher incomes who have continued to receive CB will need to ensure that they register for SA by no later than 5 October 2014 (in regard to CB payments received during the year ended 5 April 2014 – if there are unresolved issues for 2012/13, immediate action is necessary) to avoid any penalties for ‘failure to notify chargeability to tax’.  Therein lies the problem – have people been adequately informed of their responsibilities to approach HMRC and register for SA?  Will penalties be imposed on those individuals with no interest in the tax system or will people just ‘get away with it’?  More interestingly, are HMRC easily able to identify the individuals concerned? 

Another fundamental issue which has caused debate is HMRC’s approach to prompt individuals with “income over £50,000” to register for SA, yet it is an individual’s “adjusted net income” which is taken into account when determining whether the HICBC applies (for example, where personal pension contributions reduce adjusted net income below the £50,000 income threshold). 

For new claimants, if you are affected by the HICBC you can opt not to get CB payments, but you should ensure that you complete the CB claim form, as this will provide you with national insurance credits which count towards your state pension.  For those already receiving CB, you can either ‘opt out’ or ‘pay the HICBC tax charge’.

In summary, the HICBC applies to CB payments received from 7 January 2013.  Those who have applied to stop receiving CB before 7 January 2013 are not required to take any action.  As per HMRC guidance, a person is liable to pay the CB tax charge if all of the following conditions apply:

  • their income is over £50,000 a year, and
  • either they or their partner received child benefit payments after 7 January 2013, and
  • their income for the tax year is higher than their partners.  The partner with the higher income is liable to pay the charge if both partners have income over £50,000

If you wish to discuss the issues raised in this article, please feel free to contact our Personal Tax Manager: simon.boxall@wardwilliams.co.uk


Accounting News & Insights

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Child Benefit Tax Charge - Do you need to complete a tax return?

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