High Income Child Benefit Charge payment

Hoping someone might be able to help with this, as getting through to HMRC is a mission in itself!

I'm fortunate enough to be in a role with a salary that takes me above £50k p/a, so I filled in a self assessment tax return for the 2022/23 tax year (first one I've ever done) as I knew I'd have the HICBC to pay. My earnings for that year ended up at £51,120, which resulted in a £211 charge - all processed and sorted last month.

Due to a bonus which was paid in April this year, and a salary increase, my projected earnings for the 2023/24 tax year are £61,270. This would put me in line to pay back all the child benefit we are due to receive (£2,074 I believe) via the HICBC.

Just after I filled in my self assessment, I got a notification my tax code had changed. HMRC appear to be taking the HICBC for the full year (the £2,074) over the final six months of this tax year.

My understanding is that the HICBC was paid at the end of the tax year, whereas I appear to be paying it 'live' during the current tax year, based on my projected earnings. I wonder if this was common? And if so, would suspending the child benefit payments then stop the tax liability for the rest of the year? As currently £159 goes into my account for child benefit, and double that leaves to cover the charge!

Sorry if that doesn't make sense, this is a new world to me! In hindsight I probably should have suspended child benefit before the start of the tax year, but live and learn!


Comments

  • maurice28 said:
    Hoping someone might be able to help with this, as getting through to HMRC is a mission in itself!

    I'm fortunate enough to be in a role with a salary that takes me above £50k p/a, so I filled in a self assessment tax return for the 2022/23 tax year (first one I've ever done) as I knew I'd have the HICBC to pay. My earnings for that year ended up at £51,120, which resulted in a £211 charge - all processed and sorted last month.

    Due to a bonus which was paid in April this year, and a salary increase, my projected earnings for the 2023/24 tax year are £61,270. This would put me in line to pay back all the child benefit we are due to receive (£2,074 I believe) via the HICBC.

    Just after I filled in my self assessment, I got a notification my tax code had changed. HMRC appear to be taking the HICBC for the full year (the £2,074) over the final six months of this tax year.

    My understanding is that the HICBC was paid at the end of the tax year, whereas I appear to be paying it 'live' during the current tax year, based on my projected earnings. I wonder if this was common? And if so, would suspending the child benefit payments then stop the tax liability for the rest of the year? As currently £159 goes into my account for child benefit, and double that leaves to cover the charge!

    Sorry if that doesn't make sense, this is a new world to me! In hindsight I probably should have suspended child benefit before the start of the tax year, but live and learn!
    How much do you pay into your pension and are you willing to pay more in? As an example if you paid in £11,270 you would get to keep all the child benefit. However at present you only get £6,536.60 of that because of Income tax and NI, if you reduced your taxable income to £50k by increasing pension contributions then you would get to keep all of your tax credits, so your net position would only be £4,462.60pa / £371.88 pm less a month, but you would have an additional £11,270 in your pension, with the tax benefits as well.
    https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief
  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 12,724
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    edited 27 October 2023 at 10:34AM
    maurice28 said:
    Hoping someone might be able to help with this, as getting through to HMRC is a mission in itself!

    I'm fortunate enough to be in a role with a salary that takes me above £50k p/a, so I filled in a self assessment tax return for the 2022/23 tax year (first one I've ever done) as I knew I'd have the HICBC to pay. My earnings for that year ended up at £51,120, which resulted in a £211 charge - all processed and sorted last month.

    Due to a bonus which was paid in April this year, and a salary increase, my projected earnings for the 2023/24 tax year are £61,270. This would put me in line to pay back all the child benefit we are due to receive (£2,074 I believe) via the HICBC.

    Just after I filled in my self assessment, I got a notification my tax code had changed. HMRC appear to be taking the HICBC for the full year (the £2,074) over the final six months of this tax year.

    My understanding is that the HICBC was paid at the end of the tax year, whereas I appear to be paying it 'live' during the current tax year, based on my projected earnings. I wonder if this was common? And if so, would suspending the child benefit payments then stop the tax liability for the rest of the year? As currently £159 goes into my account for child benefit, and double that leaves to cover the charge!

    Sorry if that doesn't make sense, this is a new world to me! In hindsight I probably should have suspended child benefit before the start of the tax year, but live and learn!


    Your understanding is most definitely wrong.  You can pay extra income tax during the year to go towards the HICBC if you wish.

    This is a fairly regular question on here and will relate to how you completed the questions at the end of the tax return about paying tax?

    There is one about the tax due for 2022-23 (the return year) and another about the current tax year.

    I suspect you either have ignored or not understood that question and the tax code change is a result of what you did/didn't do.

    Easily rectified with a call to HMRC but they are almost certainly reacting to how you completed your own Self Assessment return.

    And just because you earn £61k doesn't mean you will have to pay back 100% of the CB.  HICBC is based on adjusted net income, which can be significantly less than earnings once pension contributions are taken into account.
  • maurice28
    maurice28 Posts: 308
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    edited 27 October 2023 at 11:23AM
    Thank you both so much for your replies, this is really helpful!

    How much do you pay into your pension and are you willing to pay more in? As an example if you paid in £11,270 you would get to keep all the child benefit. However at present you only get £6,536.60 of that because of Income tax and NI, if you reduced your taxable income to £50k by increasing pension contributions then you would get to keep all of your tax credits, so your net position would only be £4,462.60pa / £371.88 pm less a month, but you would have an additional £11,270 in your pension, with the tax benefits as well.
    https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief
    This is a great shout and something I'm going to run the figures on and investigate. Currently pay 6% into my pension, with the company also making a contribution, so I think there is scope to pay in more.

    This is a fairly regular question on here and will relate to how you completed the questions at the end of the tax return about paying tax?

    There is one about the tax due for 2022-23 (the return year) and another about the current tax year.

    I suspect you either have ignored or not understood that question and the tax code change is a result of what you did/didn't do.
    You're spot on! Thank you for flagging this, I've looked at my return again and that is exactly what happened - definitely a case of learning as I go.

    Again, you've both been very helpful for allowing me to understand better what's going on, and some possible options. Thank you for helping with my silly questions!
  • xylophone
    xylophone Posts: 43,819
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    my silly questions!

    Not silly at all! What is silly is to know you don't understand a matter and then  not request clarification for fear of looking "silly"!


    https://www.gov.uk/child-benefit-tax-calculator

    https://getpenfold.com/news/avoid-child-benefit-tax
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