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Parents urged to act now to avoid child benefit tax bill

Emma Lunn
Written By:
Emma Lunn

Thousands of families need to register for self-assessment before 5 October in order to avoid an extra tax bill.

Child benefit is paid to the parents and guardians of children up to age 16, and children aged 16 to 19, if they stay in approved full-time education or training. It is £21.15 a week for the eldest child and £14 a week for each younger child.

The ‘high income child benefit tax charge’ was introduced in 2013 and affects families where one parents earns more than £50,000 a year.

Those with income over this figure are required to pay 1% income tax on the child benefit for each £100 of income above this. This means the value of child benefit is eroded to nil once the taxable income of one of the adults exceeds £60,000.

Even if you normally pay tax through the PAYE system, you must submit a tax return to pay the high income child benefit tax.

More than 60,000 people were chased by HMRC in 2019/20 for high income child benefit tax after failing to register for self-assessment tax returns. The deadline for registering is 5 October – this coming Tuesday.

Anybody who has individual income over £50,000 and claims child benefit, or lives with a partner who claims child benefit, could be liable for the tax. Those that don’t pay the tax will be chased and could also receive a penalty fine.

According to a Freedom of Information request submitted by financial advisers at NFU Mutual, HMRC has collected nearly £3bn in the tax since its introduction in 2013.

Each year, tens of thousands of families are contacted by HMRC after failing to pay the tax because they didn’t register for self-assessment and the number has been increasing.

Sean McCann, chartered financial planner at NFU Mutual, said: “Anybody whose income has increased to take them above the £50,000 threshold should check if they’re liable for this tax.

“As well as parents, it may also be payable by individuals who move in with a lower earning partner who claims child benefit. Many employees paid through PAYE may not have registered for self-assessment before, so this is an important deadline to be aware of. Not only will HMRC chase families who don’t pay the tax, they may also add additional penalties.

“Those families where one partner has an income over £60,000 that don’t want to go through the hassle of paying this tax can opt out of receiving child benefit payments. However, it’s important that any non-working parents still make the initial claim for child benefit before opting out of receiving the payments in order to protect their state pension entitlement.”