Child Benefit High Income Tax Charge – 5 Points You Might Not Know

From 7 January 2013, where a person earns more than £50,000 and they or their partner claim child benefit, a tax charge will apply in the form of the child benefit high income tax charge. The charge will apply to the person with the highest net adjusted income – which may not be the recipient of the child benefit.

The effect of the child benefit high income tax charge will be to apply a tax liability via the self-assessment tax return system. The amount of the charge will be tapered where the child benefit recipient or their partner earns between £50,000 and £60,000, with the effect that once income reaches £60,000 the entirety of the child benefit payment will be reclaimed through the tax charge.

There are a number of areas where care should be given:

1. The charge applies where either the person claiming child benefit or their partner earns more than £50,000. Therefore it will be necessary to consider the earnings of a taxpayer’s partner. The charge will apply to the person with the highest net adjusted income – which may not be the recipient of the child benefit.

2. The child benefit high income tax charge applies from 7 January 2013 therefore a tax liability could arise in relation to the current (2012/13) tax year with the tax being due for payment by 31 January 2014.

3. Where a person is required to make payments on account, this will include any tax arising as a result of the child benefit high income tax charge thus increasing the tax payable at 31 January and 31 July respectively.

4. Where a person earns more than £60,000 it may be preferable to elect not to receive the child benefit payment (known as a ‘nil award’)

5. Claiming child benefit can protect eligibility for the state pension by way of an NIC credit. Therefore taxpayers earning more than £60,000 that do not currently receive child benefit but become eligible in the future should ensure that they do register for child benefit initially and then elect to receive a nil award so as to preserve this protection.

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3 Responses to Child Benefit High Income Tax Charge – 5 Points You Might Not Know

  1. Susan says:

    Are copies of the letters going to CB recipients available to be seen – so we can advise clients? What is the process for claiming the nil award? Neither ADL nor the CB Helplline knew anything about this and neither could not help.

    • eavesandco says:

      Hi Susan,

      Thank you for your query.

      The proforma letter and enclosed flow chart can be accessed on the HMRC website http://hmrc.presscentre.com/Press-Releases/High-Income-Child-Benefit-Charge-letters-set-to-be-delivered-68257.aspx. HMRC have also published guidance in relation to making an election for a nil award on their website.

      As you will appreciate information provided in our blog should not be relied upon without taking specific advice.

      If you or your clients require tax advice in relation to the child benefit high income tax charge or other tax matters please contact Paul Davison on 0113 2443502.

      You may be interested to note that we are registered under the ICAEW’s referral scheme and therefore offer an initial 15 minute telephone discussion to ICAEW members at a set fee of £25 plus VAT.

  2. Pingback: Deadline for Child Benefit charge - High Income Child Benefit Charge

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