High Income Child Benefit Charge

dori2o

Spidernick wrote: »

I'm not sure that post #139 is 100% correct. I cannot find anything specific about this now, but remember reading that, although there is ultimately no claw back of the Child Benefit in this scenario, a Self-Assessment return should still be filed, as the earnings are over £50K. I am in the same position as you and file an SA return every year.



Given the number of people who don't even get paid for overtime (i.e. most white-collar workers in the private sector), I would imagine sympathy for someone in this position would be in short supply!

If your pension contributions are via an employers scheme and are taken via a net pay arrangement (i.e. they are taken before tax is deducted from your salary) and this leaves your income below £50k, then you shouldn't need to do a return as the income on your P60 will show as being less than £50k.

That is unless you have other income or benefits in kind that take your income above the £50k limit.

If however the contributions are taken by your employer from your after tax pay, or you pay into a private scheme, then all HMRC will see is that your income on your P60 is more than £50k.

You then need to tell them, via the tax return, what your income is and what reliefs you are claiming.

stevedresden

I got the letter today - totally out of the blue

I do remember the announcement back in 2013, but I was only earning £40k then so it didn't trouble me

I still only earn £45k pa, but due to the role I was doing in the past 3 tax years 2016/2017/2018 I was doing a whole load of really stressful overtime and travelling which meant my taxable income was over £50k for those 3 years (I actually had to check my P60 to find this out, it never really registered at the time)

Thankfully this year I'm no longer doing that role and I don't expect to earn any more than my basic salary again (and I have my stress-free life back)

I'm happy to pay anything I owe, but the letter is really vague about what happens now. I've registered for self-assessment as it seems to suggest, but I didn't receive any kind of acknowledgement

Anyone been through similar that can explain what happens now?

One other thing that I'm confused about is that this extra taxable income has also taken me into the 40% tax bracket and I've seen mention of claiming back some kind of tax relief on my pension. Is there a simple priner anywhere that explains this and what I have to do?

stevedresden

OK - scratch that last bit about pension tax relief, it looks like my employer pension is done via salary sacrifice, so as I understand it, that means i get the correct tax relief anyway?

stevedresden

Also - I'm particularly interested in the penalties situation. In theory they might try and charge me penalties for not self-assessing in 2016/2017

But I saw this
https://www.rossmartin.co.uk/sme-tax-news/3364-high-income-child-benefit-tax-charge-no-discovery

Mr Robertson and his wife were teachers and employed under PAYE and they were not under Self Assessment.

With income in excess of £50,000, Mr Roberston had a duty to notify HMRC that he was liable to High income child benefit charge (HICBC).
He failed to notify as he was unaware of the legislation.
HMRC atttempted to raise a discovery assessment and penalties, the taxpayer appealed.
The first tier tax tribunal found that no penalties could be applied, as there was no potential lost revenue to assess. There was no self-assessment because no notice to file was given by HMRC, HMRC could not make a discovery assessment as the HICBC is not income, a requirement of s 29(1) TMA.

The letter from HMRC that I got today does say that I can avoid the penalty for 2017 if I tell them now, and may be able to avoid the penalty for earlier years if i have a "reasonable excuse"

Sounds like they are on the back foot

jimmo

A First Tier Tribunal decision doesn't really count for anything apart from the actual case that was taken. The loser, HMRC in that particular case, could, subject to procedural rules, appeal to the Upper Tribunal and the decision of the Upper Tribunal could create a legal precedent.
As things stand then HMRC are perfectly entitled to maintain their view that penalties are chargeable and any person who is charged penalties can argue against, perhaps resulting in more cases being referred to the First Tier Tribunal.
By contrast you might like to read this one where the boot is on the other foot.
https://www.dorsetoffice.com/sme-tax-news/3392-hicbc-failure-to-notify-ignorance-is-no-reasonable-excuse

brianfly

So this week I also received a letter from HMRC regarding this. Turns out that since 2015 we have been receiving Child Benefit while i earn over £50k. In 2013 this wasn't the case and we just didn't really think about it when i changed jobs and got a bigger salary. To be honest I wasn't even aware that my wife was claiming Child Benefits and didn't receive anything in the meantime to remind us of our responsibilities so it just got missed entirely. Until now.

The letter I received was pretty fair and stated that I may not be charged penalties etc and i have no issue with paying back the money if we are not entitled to it, however I just wanted to understand the process for repayment that others have followed. I also understand that this isn't a 'tax', however I am PAYE so can this be repaid using tax code re-calculation? We are talking upwards to £5.5-£6k once all the years are calculated and that is simply not an amount of money we just have lying around, its not like we have been hoarding the CB money and accruing all the interest.

Appreciate if anyone else was in a similar situation and what was accepted by HMRC.

As an aside, while doing some research on this I have come across numerous forums where people have been debating the fairness of the eligibility criteria. I cannot understand how the current process is fair at all. Whilst i understand the argument regarding 2 working parents v 1 high earner + 1 stay at home parent and all the pro's and cons, however we seem to fall into the worst category.

Whereas 2 earners on £49k each have a total household income of £98k and keep everything, myself and my wife both work full time with me being a high earner and her earning around £30k or so. This is less than £98k combined but we still have all the outgoings of couple 1 (childcare costs, 2 sets of commuting costs etc) as well as the additional taxation costs from my salary. However we are eligible for nothing.

Now I am not saying we should be eligible. I have no issue with the threshold being reduced. However if someone can clearly explain how this scenario is fair then I am all ears.

Pennywise

brianfly wrote: »

However if someone can clearly explain how this scenario is fair then I am all ears.

Tax isn't fair nor logical, but it's the law unfortunately. To get it changed you need to lobby your MP. We have to thank or LibDem friends for the introduction of the child benefit "tax". You may like to remember that at the next general election.

brianfly

Pennywise wrote: »

Tax isn't fair nor logical, but it's the law unfortunately. To get it changed you need to lobby your MP. We have to thank or LibDem friends for the introduction of the child benefit "tax". You may like to remember that at the next general election.

So you can't provide a clear explanation. Thanks for your worthwhile input.

BTW its a charge, not a tax. You may like to remember that before posting sanctimonious replies that offer nothing.

ayshfm1

This is an old post, but something I feel very strongly about.


When Osbourne chose to implement this change, I was horrified, it was unfair on every level


Child benefit should either be universal or means tested, this half baked tie into the tax system.... I'm in danger of ranting again.


I decided I would be claiming it and keeping it. I earn circa 70-80K per year and simply dump into my pension all the money that would incur 40% tax (the maximum you can put in is 40K), paying into a pension also reduces the gross amount I earn to under 50K so keeping child benefit. My wife also earns similar amounts and I on her behalf do the same.


Net impact - pension for both us grows very swiftly, we keep the Child benefit, tax man loses an awful lot of 40% revenue (42% as we salary sacrifice and duck 2% NI + company ducks 13.8% NI).


In short we each earn between 45-50K that's the artificial limit, the only fly in the ointment I am clearly going to breach the pension lifetime limit and it's looking like she will as well. Still we can fix that by retiring early before it happens.


I tell them on our tax returns every year in the hope that someone will sort this rubbish out, so far they don't seem bothered. I would suggest as many of you who can do the same!

HappyHarry

brianfly wrote: »

So you can't provide a clear explanation. Thanks for your worthwhile input.

BTW its a charge, not a tax. You may like to remember that before posting sanctimonious replies that offer nothing.

You didn't ask for a clear explanation, indeed, you seem very clear on the workings of this charge.

You asked

However if someone can clearly explain how this scenario is fair then I am all ears.

I doubt anyone could justify the fairness of this.

Pennywise, who is a wealth of information on tax, and has helped countless posters on these boards, has provided a comment and a way of remedying the "unfairness". A brief "thank you" would be the normal response.

These boards tend to be suitable for posters looking for information. If you're posting looking for sympathy for your position, and lots of "oh it's soooo unfair" type comments, then perhaps mumsnet might be better for you?

(I know that I am ignoring the "please be especially nice" to new posters warning in this instance, but I think its acceptable this time).