High Income Benefit Charge

ZaSa1418

Hi all, i have had a search and have managed to confuse myself so though i would ask for advice.

Last tax year i went over the threshold and did a tax return where i have to pay about 90% of the child benefit back. It is due January 2024 so i paid some money towards it but i keep getting a message every time i log onto the Government Gateway saying i have overpaid tax for the year and can claim a refund. 
Assume that is related to the payment i made towards the tax bill for the child benefit overpayment and i can ignore? 

I also keep seeing something on there about paying money in July 2024 as money on the account? Is this just for people who are self employed rather than people who just have to do a tax return for the child benefit charge?

Dazed_and_C0nfused

Unless you want the money back now then yes you can just ignore it.

You've paid earlier than necessary which is why you are given that option.

If you claim a refund now you will still have to pay the full amount due by 31 January 2024.

POA are not something just for the self employed.  They can apply to anyone completing a tax return but there are rules in place so some people don't need to make POA.

If the amount owed under Self Assessment is less than £1,000 then POA for the following tax year won't be required.

And if you pay at least 80% of your total tax liability at source i.e. PAYE tax then you won't need to make POA for the following tax year either.

So say your liability is £15,000 but you have paid £13,500 on PAYE and have just £1,500 to pay via Self Assessment then you won't need to make POA for the following tax year.

ZaSa1418

Dazed_and_C0nfused said:

Unless you want the money back now then yes you can just ignore it.

You've paid earlier than necessary which is why you are given that option.

If you claim a refund now you will still have to pay the full amount due by 31 January 2024.

POA are not something just for the self employed.  They can apply to anyone completing a tax return but there are rules in place so some people don't need to make POA.

If the amount owed under Self Assessment is less than £1,000 then POA for the following tax year won't be required.

And if you pay at least 80% of your total tax liability at source i.e. PAYE tax then you won't need to make POA for the following tax year either.

So say your liability is £15,000 but you have paid £13,500 on PAYE and have just £1,500 to pay via Self Assessment then you won't need to make POA for the following tax year.

Thank you so much for your response, it has really helped me  

canarydan

The High Income Child Benefit charge is ridiculous.

When it was introduced in 2013, £50k p/a was the equivalent of £67k salary in today's money. By not linking it to CPI or RPI and increasing the threshold, people on a £50k salary now and having to face reductions in child benefit had the spending power of someone earning £37k when the policy was introduced. Would they have called £37,000 a year "High Income" back then?

I've hit the threshold in the last two tax year's (due to staggered payments after the company I work for and had a small shareholding in being bought out) and have essentially been forced into Cycle2Work and making pension contributions, because there was no point in earning anything between £50k and £60k. With three kids all born before the two child limit, I would have been paying an additional 27% of my earnings on the High Income Charge, along with 40% Income Tax and 2% NI, and until a couple of months ago I was making Plan 1 student loan repayments which would have been another 9%.

So I would only have taken home 22% of my earnings between £50k and £60k. I only work a four-day week, something I started when my wife went back to work after her first maternity leave. Now my youngest is at school I could easily go back full-time and my boss is desperate for me to, but I've told him there is no point, not until it would mean my annual salary and earn-out commission got to around the £70k mark. Until then, or until my eldest stops being eligible for child benefit, I'll keep having Wednesdays off and making big lump sum payments into my pensions.

I should probably be grateful to be honest; there is no way on God's green earth my wife would have permitted me having both a road bike AND a mountain bike worth a grand each!

r6mile

I am in pretty much the same situation - FTE salary is 66k and have 3 kids, so have gone down to 4 days a week (also Wed off) give my marginal rate over 50k is around 70%.

In my case on my day off I look after my younger twins which saves a day of nursery - so a financial no brainer, to stay below HICBC (which also requires some extra pension contributions).

Even when the younger ones go to school I might stay on 0.8FTE - perhaps arranged differently so I can do some pick ups. But not sure - I am a civil servant and with this years 4.5% pay rise I’ll be just under 70k FTE and next year’s will surely tip me over.

There will come a point where I’ll have to bite the bullet and accept losing CB (as I don’t think I could justify “sacrificing” say 25k of gross salary). Especially since 50k buys less and less over time…

retiringtoosoon

I can’t understand why people don’t just up their pension contributions to avoid it being a problem, rather than going down to working 4 days a week.

r6mile

In my case because it saves on childcare costs too. In others’ cases perhaps it benefits their work life balance. The whole point of CB is that it affects people with kids, so working fewer hours might mean you get to spend more time with them (at a relatively low “net” cost due to HICBC and HR tax). Some possible reasons!

MattMattMattUK

The easiest way to solve the HICBC would be to abolish child benefit entirely, as a benefit it does not make sense.

r6mile

Surely the easiest way to solve HICBC is to abolish HICBC - which is only 10 years old! Or increase the point at which it applies, and/or ensure it keeps up with inflation, and/or reduce the rate at which it tapers.

50k now is worth less than 40k at the time HICBC was introduced. And the fact Child Benefit increases by inflation every year but the HICBC threshold is frozen means the steep marginal tax rates it creates get worse every year…

The UK tax system is already quite unfriendly towards families (in other countries for example your tax allowance is increased per child). Abolishing child benefit would BW ridiculous.

MattMattMattUK

r6mile said:

Abolishing child benefit would BW ridiculous.

Why would it be ridiculous? It is a blanket subsidy from one group of taxpayers to another, with no basis in need, that make it a bad policy.

r6mile said:

The UK tax system is already quite unfriendly towards families (in other countries for example your tax allowance is increased per child). 

Almost every other country allows married couples to file jointly for tax purposes. The UK treats them as the same entity for almost everything else financial apart from taxes, it is an exception amongst advanced economies. Joint filing would make more sense, but it would also mean a reduction in tax revenue. In the other countries where it is offered it helps one higher earning partner and one mid earning partner stay out of higher tax bands, but it does not remove much of their income from tax entirely. In thr UK because we have a excessively large tax free allowance it would mean even fewer people paying a reasonable amount of tax so that presents a problem, joint filing makes sense overall, but before we went down that route we would need to significantly cut thr tax free allowance, which we should be doing anyway.

Bossworld

Interesting to see other posts on here (and others who've ended up with a couple of bikes). I do use both of mine for commuting (one locally, the other for being down in London).

I agree with the point about the lack of incentive to earn between 50 and 60k. You almost need to break through to 60k and just accept the full removal of CB.

I've done the maths extensively and the difference between £50k and £51k, in terms of proportional loss of CB, 9% Plan 1 student loan, 40% PAYE (+2% NI), and loss of eligibility for marriage allowance, meant you'd see an extra £58 net pay, in comparison to landing at £50k for the year. Obviously that's an extreme example because it's amplified by the marriage allowance, but it's not a particularly pretty picture between 51 and 60 either.

While it's technically a 'nice' problem to have, we're a single income household so the lack of household income assessment for HICBC is a tough pill to swallow when you consider 2 x 45k incomes would have no issues with HICBC (albeit would likely have more childcare costs to contend with).

It does give you some perspective into viewpoints on other forms of benefit and the reasons people explain as to the lack of financial incentive to up working hours or similar.