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Relaxation of rules on self assessment for child benefit

Future change to child benefit for high income households could help thousands of parents avoid HMRC fines

Those in receipt of child benefit who are required to repay under the High Income Child Benefit Charge (HICBC) rules have, until now, had to complete a self assessment tax return. But ministers have said that in the future this will not be necessary. Instead, the money will be reclaimed via the individual’s PAYE tax code – although no firm dates have been confirmed as of yet.

Experts hope that this will solve the problem of high income households being hit with fines for inadvertently not paying the charge.

What is the income limit for child benefit?

In households where child benefit is being claimed, it is important that the individual or couple receiving the child benefit keeps a close eye on their income level.

If the higher earner has annual income of more than £50,000, some or all of the child benefit received will need to be repaid under the HICBC. It does not matter if the child living with you is not your own child, or whether you and your partner are married, the higher earner still needs to repay.

How much child benefit must I repay?

For every £100 earned over £50,000, you will pay back 1% of your child benefit.

So, If you or your partner has an annual income of £55,000, 50% of your child benefit needs to be repaid. If you or your partner has an annual income of £60,000 or more, all of your child benefit needs to be repaid.

Use the Child Benefit tax calculator to get an estimate of the HICBC you or your partner may have to pay.

Do I need to declare child benefit on a self assessment tax return?

Currently, individuals who need to pay the HICBC must submit a self assessment tax return each tax year, even if they are employed and normally pay their tax through PAYE.

However, in the future, high earners and their partners will no longer need to register for self-assessment and will instead pay what they owe via their PAYE tax code.

As a high earner, can I opt out of receiving child benefit?

If you are a high earner, you can opt-out of receiving child benefit payments and not pay the tax charge. However, you should still fill in the child benefit claim form in order to get National Insurance credits, which count towards your State Pension.

What are the penalties if I fail to pay the HICBC?

If you need to pay the charge and you don’t file a tax return, you could be fined a percentage of what you owe by HMRC. So, even if you’re not sure whether you need to pay the charge, it’s a good idea to register anyway.

We hope that you’ve found this article helpful. If you require more guidance on this topic or have any other tax queries, please get in touch. Our experienced team would be happy to help.