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Parents urged to check High Income Child Benefit Tax Charge

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Written by: Emma Lunn
20/01/2021
Families are being urged to check whether they’re liable for the tax charge this month following an HMRC clampdown last year.

You may have to pay the High Income Child Benefit Tax Charge if you have an individual income of more than £50,000 and you or your partner receive Child Benefit.

HMRC has collected £18.9m in fines from people who have failed to pay the tax charge since 2013.

Financial advisers NFU Mutual found that the number of compliance checks HMRC made almost doubled from 63,591 in 2018/19 to 125,594 in 2019/20.

The deadline for paying the tax is 31 January – the same as the self-assessment deadline – and parents who usually pay tax through PAYE, and are liable for the charge, must submit a tax return.

Sean McCann, chartered financial planner at NFU Mutual, said: “The £50,000 threshold hasn’t changed since 2013 meaning more and more families are being caught as incomes increase.

“Many will be unaware of this extra tax and the penalties for failing to declare and pay on time.

“Even if you’re paid through PAYE and don’t normally complete a tax return, the onus is on you to tell HMRC and pay the tax by the end of this month. If you had a pay rise in 2019/20 or moved in with a new partner who claims child benefit you could be caught, even if they’re not your children.

“The good news is that anything you’ve paid into your pension is knocked off your income before the charge is assessed. If it reduces your income below £50,000 you won’t need to pay the charge.”

Data obtained by NFU Mutual shows HMRC collected £1.63bn from the tax between January 2013 to April 2017.

NFU Mutual also estimates that the government has saved a further £4.3bn in child benefit from families who have decided to opt out of receiving it.

McCann said: “More than half a million families have chosen to opt out of receiving child benefit so they don’t have to repay via the tax charge.

“However, child benefit also enables the recipient to continue to benefit from vital National Insurance credits that go towards their state pension, until their child turns 12. It’s important families assess the impact of opting out altogether.”

NFU Mutual is encouraging anybody whose income has dropped recently to check if they should start reclaiming child benefit. Some people may have seen a drop in their income and might not realise they can start to claim child benefit.

The financial advisers calculated that if the income of the highest earner in the household has dropped below £60,000 it is usually worth opting back in to receive child benefit.

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