High Income Child Benefit Charge - Tax Calc & Fines

Hello,

Two questions related to High Income Child Benefit Charge 

We are filling the self assessment for the first time this year.  Partners car benefit takes us over the threshold.  However when we have looked at the calculation it is also saying we owe more tax.  
The calculation on self assessment adds the benefits amount on the P11D to the gross pay (minus pension) and gives full personal allowance.  This means that we are paying higher rate of tax on the benefits amount.
However during the tax year the benefits were taken off the personal allowance amount, but the tax on that additional amount would have been at the lower 20% rate.  
Seems like self assessment is charging more tax on those benefits?

Example:
Net adjusted income of £55,000
Pay  £47,000
Car Benefits P11D £8.000
Personal Allowance £12570
40% Threshold £50,271

So in the self assessment calc 
Paying 20% tax on £37,700
and 40% tax on £4730 
£9432 tax in total

Through PAYE
£8000 benefits is taken from personal allowance to reduce this to £4570
20% tax paid on £42,430 of income
£8486 tax to pay

so the self assessment tax works out at £946 more

If we weren't having to fill in the self assessment for high income child benefit tax charge then we would never be asked to pay that additional £946.  This seems wrong to me??

Secondly 
Has anyone managed to appeal a fine for a late self assessment return successfully??

Thank you
Louise




Comments

  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 12,802
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    If we weren't having to fill in the self assessment for high income child benefit tax charge then we would never be asked to pay that additional £946. This seems wrong to me??

    Secondly 
    Has anyone managed to appeal a fine for a late self assessment return successfully??
    Your first statement is wrong.  If you weren't completing a tax return then HMRC would send you a calculation showing any tax due for that year.  You wouldn't get off without paying it.

    Secondly yes, millions will probably have done over the last 25 years of Self Assessment.

    Given you have a week left (assuming 31 January is the deadline for your return) then why would it be late?

  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 12,802
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    Through PAYE<br>£8000 benefits is taken from personal allowance to reduce this to £4570 
    20% tax paid on £42,430 of income 
    £8486 tax to pay
    That is wrong.

    The taxable income is still £55,000 and the Personal Allowance is still £12,570.

    If he earns £47,000 with tax code 457L then the tax deducted would be
    4570 no tax
    37700 x 20% = £7,540
    4730 x 40% = £1,892
    Total tax = £9,432
  • actionyum
    actionyum Posts: 7
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    So the tax thresholds aren't a set income they are the first X amount over and above your adjusted personal allowance.  Thank you that makes sense.  
    Late because we now realise we need to do one for year before last :(
    Didn't know that the benefits counted as additional income for child benefit purposes.
  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 12,802
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    edited 24 January at 8:42PM
    actionyum said:
    So the tax thresholds aren't a set income they are the first X amount over and above your adjusted personal allowance.  Thank you that makes sense.  
    Late because we now realise we need to do one for year before last :(
    Didn't know that the benefits counted as additional income for child benefit purposes.
    A tax return can only be late if it is filed more than 3 months after it was issued (or a notice to file one was issued) by HMRC.

    Are you sure the return is late?  If so why didn't you file one once the notice to file had been issued?

    Irrespective of the above interest will usually be charged on any tax paid after the normal payment date for the year.  But that isn't a £100 penalty.
  • BoGoF
    BoGoF Posts: 6,791
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    OP is missing the fundamental point that the higher rate threshold of £50,270 includes the personal allowance of £12,570.
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