When do I pay back child benefit?

KaratePigeon

Sorry might not be the right board and I promise I have searched first but can't find an answer!

This tax year will be my first going over £50k taxable income (likely to be near 60k after bonus). I've tried to put more in my pension to reduce it etc but as a single mum I can't really afford to (3 kids with no help from their dad, and in the south west so that salary doesn't go far, but that's a different conversation). 

What I can't work out is will I have to pay back the repayments for this year? Or does it start from April that I will no longer be entitled to the full amount? 

Ozzig

The first year you earn over £50k is the first year you start paying it back. From memory, unless you elect to stop receiving it altogether it means you'll end up on SA to declare it.

Don't forget it's tapered so depending on the whole picture you may not be paying the lot back.

I think there's a calculator on the HMRC website that works it out for you. Realistically you won't know for sure until the tax year ends and you have your final figures.

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

KaratePigeon

Thanks, yes I'm not sure of what my final earnings will be other than it'll definitely be over £50k. So I would need to pay back most if not all of what I've received this year? For some reason I thought you got paid the year after depending on what your earnings were the previous year but I've probably got that wrong! 

On-the-coast

With 3 kids you do realise that your marginal rate of tax between 50 & 60k is going to be about 70%?

I understand what you say about needing the money now (I had 4 kids) but that means that you’re really only getting £30 in your pocket for every £100 you don’t put in your pension…

KaratePigeon

On-the-coast said:

With 3 kids you do realise that your marginal rate of tax between 50 & 60k is going to be about 70%?

I understand what you say about needing the money now (I had 4 kids) but that means that you’re really only getting £30 in your pocket for every £100 you don’t put in your pension…

I know I've upped my contributions, they were 4% last year and I've put them up to 10% for the last couple of months so I'm trying. My company are changing the month the bonus pays out so I'm going to end up with 2 this tax year and none next year and I do need that money with the cost of everything going up and it makes it really confusing to budget. 

KaratePigeon

I'm going to have to pay all my bonus into my pension aren't I 

daveaspy

as far as paying it back - I believe this is how it works as I'll fall into this category this year, if anyone can confirm...

2023/24 will put me in payback territory for the first time.
I'll have to do self assessment some time after April 2024 and what I owe will be collected monthly through my tax code in 2025/26.

So if you do need the money, you at least don't pay it back right away

Veteransaver

There may be other ways to sacrifice your salary, Eg with cycle to work scheme or company share scheme (you can access company share schemes after 5 years so isn't as long as tying it up in a pension.
I'd be moaning at my employers to be honest for paying 2 bonuses in one tax year!
Also, you could look to pay more pension this tax year but reduce them next year to claw back the difference in your take home pay, whilst still keeping your income under 50k.
Maybe don't drop the pension contributions too low though if it means losing out on any employers matching contributions though.

KaratePigeon

daveaspy said:

as far as paying it back - I believe this is how it works as I'll fall into this category this year, if anyone can confirm...

2023/24 will put me in payback territory for the first time.
I'll have to do self assessment some time after April 2024 and what I owe will be collected monthly through my tax code in 2025/26.

So if you do need the money, you at least don't pay it back right away

Thanks, that's good if it's true I won't need to pay it back until 25/26. Hopefully my financial situation will be a bit better by then!

Dazed_and_C0nfused

KaratePigeon said:

daveaspy said:

as far as paying it back - I believe this is how it works as I'll fall into this category this year, if anyone can confirm...

2023/24 will put me in payback territory for the first time.
I'll have to do self assessment some time after April 2024 and what I owe will be collected monthly through my tax code in 2025/26.

So if you do need the money, you at least don't pay it back right away

Thanks, that's good if it's true I won't need to pay it back until 25/26. Hopefully my financial situation will be a bit better by then!

Collection of amounts due under Self Assessment (such as HICBC) have to meet certain rules to be eligible for coding out.

Three key ones are,

1.  The Self Assessment return must have been filed by 30 December (30 December 2024 for the 2023-24 tax year).

2.  The amount owed must be less than £3,000

3.  You must continue to have a PAYE employment or pension which can support collection of the amount owed.  HMRC seem to view this as already paying at least as much tax as the amount owed.

canarydan

KaratePigeon said:

daveaspy said:

as far as paying it back - I believe this is how it works as I'll fall into this category this year, if anyone can confirm...

2023/24 will put me in payback territory for the first time.
I'll have to do self assessment some time after April 2024 and what I owe will be collected monthly through my tax code in 2025/26.

So if you do need the money, you at least don't pay it back right away

Thanks, that's good if it's true I won't need to pay it back until 25/26. Hopefully my financial situation will be a bit better by then!

I've been put in this position short-term as well and it's really frustrating. My salary isn't near £50k, but our company was bought out and as myself and one other had been there from the start, the old owners agreed to pay us a small percentage of the buyout, effectively treating us as 5% shareholders but without the formal shareholding. They are paying it in three stages, so for three tax years I find myself over the £50k threshold.

Like you, I have three children. For the first payment, I was also paying back my student loan, so essentially for everything above the high-income tax threshold, I'd have been paying 43.25% in income tax and NI, 9% student loan plus effectively a 27% tax to cover the high income child benefit charge. So up to £60k, I would earn less than 21p in every £1.

I've got one more payment to come, so I'm hoping for good news in the March budget. But for my first two payments, as it isn't paid through PAYE, I was able to make use of the tax-free trading allowance to get £1,000 tax free, and then in each tax year I treated myself to a new road bike and then a new mountain bike through the cycle to work scheme and then had to dump the rest into my pension to bring my net adjusted income down to below £50,099.

For the final year I will be able to split the payments across two tax years, so as to maximise two tax-free trading allowances, but I'll still be chucking thousands into a pension. Again, unless Mr Hunt sees sense.