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High Income Child Benefit Charge

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High Income Child Benefit Charge

edited 30 November -1 at 1:00AM in Benefits & Tax Credits
6 replies 650 views
alwayssomethingnew...alwayssomethingnew... Forumite
3 posts
edited 30 November -1 at 1:00AM in Benefits & Tax Credits
My scenario is a little different from other posts on this topic.

I'll caveat the below with I've not spoken to HMRC yet as there hasn't been a working day since I received the letter.

In 2014 we started claiming Child Benefit, I registered for Self-assessments as my salary and BIK was going to be around £50k. Turns out I owed HMRC nothing, and even sent me a letter advising "the tax year ended 5 April 2015 is the last year you will need to complete a tax return. My belief was they knew I was claiming child benefit and my PAYE tax code would be adjusted accordingly, during the tax year 2015-2016 I received at least 5 changes to my PAYE tax code which I thought was it.

On Saturday I received the standard "Do you have to pay the High Income Child Benefit Charge?" letter, which to me suggests they believe I owe them some money, why else send me a letter. Using the online calculator, which doesn't take account of any tax I have paid, suggests over the course of 2015-->2018 I potential owe them £1800.

Do HMRC ever attach the High Income charge to a PAYE tax code? In which scenario I owe them nothing as I've already been paying it or can that simply not happen and am I liable for the £1800 + tax + penalty charges (which at worst case, unless I've misread, can be up to £1600 per year)? Whilst I fully expect to have to pay any tax I owe, as they advised me not to complete a self assessment have a got a leg to stand on regarding avoidance of any interest and penalties?

Either way I don't have the funds available to pay the £1800 let alone a potential much high figure, so if they won't make an adjustment to my tax code to cover this I'll be looking to take a load a personal loan (as personal credit cards don't appear to be accepted any more).

Any thoughts on how best I should approach this?

Replies

  • Alice_HoltAlice_Holt Forumite
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    Generally HICBC will be collected through Self Assessment, but can be included in the tax code as part of the SA Autocoding process (according to HMRC internal document PAYE14015 below).

    https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye13150#IDAMQPWH is relevant to your question.

    It looks to me that if the SA form was completed correctly each year, there is a chance that it may have been included in your code.

    I guess the thing to do is to look at your notice of coding, to see if the HICBC was itemised as part of your tax calculation. If it wasn't then contact them to establish how much is owed.
    Ask if HMRC are able to adjust your 20/21 tax code so you can repay over a year, better than a loan I would think (if it's possible).

    https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye14015
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  • edited 17 November 2019 at 9:18PM
    Dazed_and_confusedDazed_and_confused Forumite
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    edited 17 November 2019 at 9:18PM
    Do HMRC ever attach the High Income charge to a PAYE tax code?

    Yes, that can happen but it doesn't prevent the need for a Self Assessment return to be filed. The tax code adjustment could reduce the tax payable but doesn't preclude the need for a return to finalise matters after the year end.
    (which at worst case, unless I've misread, can be up to £1600 per year)?

    I think you are mixing up different things. What exactly do you think this £1,600 relates to?
    Whilst I fully expect to have to pay any tax I owe, as they advised me not to complete a self assessment have a got a leg to stand on regarding avoidance of any interest and penalties?

    Interest no, might be different for penalties. But what penalties are you referring to? Tax return penalties or a penalty linked to the tax you might owe?

    The interest is simply to take account of the fact that you have had the benefit of the tax money when it should have been paid over to HMRC. HMRC do have a fairly low interest rate for tax owed, 3% I think.

    Either way I don't have the funds available to pay the £1800 let alone a potential much high figure, so if they won't make an adjustment to my tax code to cover this I'll be looking to take a load a personal loan (as personal credit cards don't appear to be accepted any more).

    You will not be able to have any tax owed for years to 05:04:2018 included in your tax code.

    If you want to have anything owed for 2018:19 included in your 2020:21 tax code then you will have to,
    File the 2018:29 return by 30 December 2019 and
    Owe less than £3,000 for 2018:19 and
    Be earning enough for your code to collect the tax due
  • I was going purely on the basis they sent me a letter to say 2015 was the last year I would have to file a self assessment, when in reality that gave incorrect advise.

    I was thinking, if they were expecting a self assessment, the fine for being 12 months+ late would incur a £1600 fine, if they then decided I had done that 3 times, the total penalty would be £4800 + the tax owed + interest - as suggested I've probably mixed the too things together.

    I've spoken to HMRC today, only took 10 minutes to be connected to someone which seemed pretty quick, after 20 minutes or so of explaining situation and going over figures they have gone away to make a decision on what penalty they may give me, 10% of the take owed was mentioned but wasn't official. should have a decision in couple of days as to what is owed.

    I'll be filling a 2018-2019 self assessment this week as if the calculator is correct that can definitely be added on to by PAYE tax code for 2020/2021.

    The only slight cause for concern is it was mentioned there is something unusual with my tax return submitted in 2015, however, no specific details were given and after they went away to discuss with a colleague nothing further was mentioned. All I can think is I got a rebate that year and the following year was given a £900 underpayment protection added to my tax code, figured this was do to with Child benefit charge at the time and never looked into it.

    It was also eluded to that the interest rate is based upon the bank of england rate so less than 1% silver lining I guess.
  • Dazed_and_confusedDazed_and_confused Forumite
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    I was thinking, if they were expecting a self assessment, the fine for being 12 months+ late would incur a £1600 fine, if they then decided I had done that 3 times, the total penalty would be £4800 + the tax owed + interest - as suggested I've probably mixed the too things together.

    You originally said you hadn't been asked to file a return in recent years. HMRC cannot impose a penalty for late filing of a return if you haven't been asked to complete one.

    If they do decide to issue a return you always get an absolute minimum of 3 months to file it before late filing penalties are imposed.

    If you have now been sent a 2018:19 return though you would still have to file it by 30 December 2019 to have any chance of the tax due for 2018:19 being collected through your 2020:21 tax code.

    I think you are probably missing late filing penalties with other penalties HMRC can impose. Which are often a percentage of tax owed.
    It was also eluded to that the interest rate is based upon the bank of england rate so less than 1% silver lining I guess.

    I don't know why they told you that. It might be connected to the Bank of England rate however gov.uk clearly shows the current interest rate for tax paid late is 3.25%.

    https://www.gov.uk/government/publications/rates-and-allowances-hmrc-interest-rates-for-late-and-early-payments/rates-and-allowances-hmrc-interest-rates
  • You originally said you hadn't been asked to file a return in recent years. HMRC cannot impose a penalty for late filing of a return if you haven't been asked to complete one.

    That was my thinking, as they didn't ask me fill one, and the last correspondence i had on the matter clearly stated i didn't need to (i mentioned this several times, along with the fact I still have that letter).
    If you have now been sent a 2018:19 return though you would still have to file it by 30 December 2019 to have any chance of the tax due for 2018:19 being collected through your 2020:21 tax code.

    I've not been sent one yet, but they have said i need to complete one which i will way before 30th December.
    I don't know why they told you that. It might be connected to the Bank of England rate however gov.uk clearly shows the current interest rate for tax paid late is 3.25%.

    As I've not yet been asked to pay back anything, shouldn't it be classed as repayment rather than late - a late payment to me suggests they need to have asked for an amount with a deadline which would have to have passed before late payment comes into effect, however, I'm under no illusions that you are almost certainly right :)
  • Dazed_and_confusedDazed_and_confused Forumite
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    Although you will get at least 3 months to complete any Self Assessment returns that are issued interest is usually charged from the normal date the tax is payable for the year in question.

    For example any Self Assessment liability for 2017:18 should have been paid by 31:01:2019 so interest would be charged from then until the tax is actually paid.
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