High Income Child Benefit Charge

Tonski

I've just received a letter from HMRC dated 21.11.23 saying "check if you need to pay High Income Child Benefit Charge for 2022 to 2023". We have claimed child benefit since my daughter was born in April 2019. Around Christmas 2022 my salary increased from ~£49k to £53.5k which is in the taxable £50-60k region for child benefit. I have paid 10% into my pension for virtually all of the 2022-23 tax year apart from the last 1 or 2 months where I increased my contribution to 13%. As my pension took my salary under the £50k taxable limit for child benefit, I assumed I didn't have to fill in a self assessment and I would still receive the full amount as my partner earns less than £50k, is this correct or should I have filled in a self assessment? 

The letter tells me to register for a self assessment but when I go onto gov.uk it says "You must register for Self Assessment by 5 October if you need to complete a Self Assessment tax return and have not sent one before. You could be fined if you do not." Obviously I have missed this deadline, should I just proceed and register for the self assessment?

The letter goes on to say "Within 14 days of registering, we'll send you details on what you need to do next. We will also confirm the deadline for you to send us your return and pay the HICBC". This sounds to me that they have already decided that I need to pay a charge, any help with this would be much appreciated. Surely they have my salary and pension details already and can work out themselves if I need to pay a charge or not?

r6mile

Did you let HMRC know about your pension contributions (assuming these were made via a relief at source scheme)? If they were unaware then that is likely the reason. I would suggest trying to speak to HMRC (you could try the live chat option, or via phone), and hopefully this will be sorted.

Tonski

r6mile said:

Did you let HMRC know about your pension contributions (assuming these were made via a relief at source scheme)? If they were unaware then that is likely the reason. I would suggest trying to speak to HMRC (you could try the live chat option, or via phone), and hopefully this will be sorted.

I haven't informed HMRC directly about my pension contributions, i assumed they would know about them as they come directly out of my pay. Is this something i'm supposed to do?

Dazed_and_C0nfused

HICBC is calculated using your adjusted net income.

For most people this is the total of all taxable income (inclusive of taxable income taxed at 0%) less any Gift Aid contributions and relief at source (RAS) pension contributions.

Until you know that you cannot know if you are liable to pay HICBC or not.

Pension contributions are usually made using one of three methods,

Net pay
Relief at source
Salary sacrifice

Until you know which method is being used you cannot know your adjusted income.  You cannot deduct net pay or salary sacrifice contributions as you would be double counting them.

xylophone

Try this

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

zagfles

Tonski said:

r6mile said:

Did you let HMRC know about your pension contributions (assuming these were made via a relief at source scheme)? If they were unaware then that is likely the reason. I would suggest trying to speak to HMRC (you could try the live chat option, or via phone), and hopefully this will be sorted.

I haven't informed HMRC directly about my pension contributions, i assumed they would know about them as they come directly out of my pay. Is this something i'm supposed to do?

It depends. If the pension contribution is "net pay" or salary sacrifice then the contributions is already deducted from your taxable pay so HMRC don't need to know. But if it's a RAS scheme, eg a group personal pension, where the pension provider claims basic rate relief, then you do need to tell them, because the pension contribution is taken from your after tax pay, not pre-tax.

What does your P60 show as your income? What do your pension statements show, do they show the pension company claiming tax relief?

If it's a RAS scheme then your pension statements will show tax relief being claimed, and your P60 will show pay without pension conts deducted. You need to tell HMRC, not only for the HICBC but also to get higher rate relief.

If it's not RAS, then your P60 should show income after pension conts deducted.

Tonski

I asked our account about the pension contributions when I got my pay rise and they said "Your contributions to the scheme are paid by salary exchange.  As the contribution is now being paid by salary exchange (that is, by the employer) no income tax is deducted as the salary has been given up. So you effectively get your full tax relief immediately and do not have to claim it through a tax return."

I don't have a P60 in my pay slips for 2022-23. Don't sure why it's not there, maybe they haven't processed them yet. I've been back through my pay slips through, and I think I realise where this has come from. Our company did very well this year and we all got a large bonus in March 2023 ~£6.5k. I have summed my net pay for the 2022-23 tax year and it came to ~£40.5k but the taxable gross on the March pay slip says ~£53k. I guess this large bonus has pushed me over the limit? As i'm ~£3k over the limit, do I now owe 30% of the benefit I received i.e £21.8*52weeks = £1133.6*0.3 = £340.08?

As the deadline for the self assessment was 5th October, and HMRC have asked me to fill in a self assessment, will I be fined for this?

zagfles

Tonski said:

I asked our account about the pension contributions when I got my pay rise and they said "Your contributions to the scheme are paid by salary exchange.  As the contribution is now being paid by salary exchange (that is, by the employer) no income tax is deducted as the salary has been given up. So you effectively get your full tax relief immediately and do not have to claim it through a tax return."

I don't have a P60 in my pay slips for 2022-23. Don't sure why it's not there, maybe they haven't processed them yet. I've been back through my pay slips through, and I think I realise where this has come from. Our company did very well this year and we all got a large bonus in March 2023 ~£6.5k. I have summed my net pay for the 2022-23 tax year and it came to ~£40.5k but the taxable gross on the March pay slip says ~£53k. I guess this large bonus has pushed me over the limit? As i'm ~£3k over the limit, do I now owe 30% of the benefit I received i.e £21.8*52weeks = £1133.6*0.3 = £340.08?

As the deadline for the self assessment was 5th October, and HMRC have asked me to fill in a self assessment, will I be fined for this?

Your employer by law has to give you a P60 by the end of May, so you should have had it ages ago.

Why have you summed your net pay, that's irrelevant, you need your gross taxable pay (which will be after pension conts as your employer uses sal sac). If this is £53k then yes you need to pay back 30% of the child ben you received.

r6mile

Remember though that any gift aid-eligible donations will also reduce your Adjusted Net Income, and gift aid donations can also be "carried back" and considered to have made in the prior tax year. So if you have made any, worth letting HMRC know of these, as they will reduce your ANI and therefore your HICBC liability.

mr._prude

I will be heading down this route for the tax year 2023/24, but was hoping the threshold would have been raised in the autumn statement. Now hoping for the spring budget, but I'm not holding my breath.

Just wondering is there anything else I can be doing to reduce adjusted income

> Salary sacrifice pension increased.

> Savings and Investments now inside ISAs

> Charity Gift aid donations tracked since April

> Planned one-off pension payment from bonus before end of tax year

r6mile

Cycle to work scheme? These can be helpful if you were going to buy a bike anyway as the savings are big as a higher-rate taxpayer (not necessarily worth buying a bike just for this) but they operate via salary sacrifice. so will obviously also reduce ANI.