What is the High Income Child Benefit Tax Charge?
You may have to pay a tax charge, known as the ‘High Income Child Benefit Charge,’ if you or your partner have an individual income over £50,000 and either:
You or your partner receive Child Benefit.
Someone else receives Child Benefit for a child living with you and contributes at least an equal amount towards the child’s upkeep.
It does not matter if the child living with you is not your own child.
What Counts as Income
To determine if your income is over the threshold, you’ll need to calculate your ‘adjusted net income.’
Your adjusted net income is your total taxable income before any personal allowances, less deductions such as Gift Aid.
Who Pays the Tax Charge
If both you and your partner have incomes over £60,000, the person with the higher income is responsible for paying the tax charge.
‘Partner’ means someone you’re not permanently separated from who you’re married to, in a civil partnership with, or living with as if you were.
If Your Income is Over the Threshold
You can choose to either:
Continue receiving Child Benefit payments and pay any tax charge at the end of each tax year.
Opt out of receiving Child Benefit payments and avoid the tax charge.
If You Choose Not to Receive Child Benefit
You can still complete the Child Benefit claim form and indicate that you do not wish to receive payments.
Completing the claim form is necessary if you want to:
Receive National Insurance credits, which count towards your State Pension.
Ensure your child automatically gets their National Insurance number before they turn 16; otherwise, they will need to apply for one themselves.
If You Are Already Receiving Child Benefit
You can choose to either:
Stop receiving Child Benefit (sometimes known as ‘opting out’).
Continue receiving Child Benefit and pay any tax charge at the end of each tax year.
Paying the Tax Charge
To pay the tax charge, you must:
Register for Self-Assessment.
Complete a Self-Assessment tax return each tax year and pay what you owe.
Register for Self-Assessment
If you do not normally submit a tax return, you need to register by 5 October following the end of the tax year in which you need to pay the tax charge.
Failure to register for Self-Assessment or declare Child Benefit on your Self-Assessment tax return can result in a penalty.
For initial advice about Accounting and Taxation, call our team on 0203 488 7503, 01992 236 110, or contact us by email at welcome@walshwestcca.com or via our website www.walshwestcca.com, and we will help you.
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