Child tax credits query

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perfectspiral
perfectspiral Posts: 27 Forumite
in Benefits & tax credits
Hello,


I earn an annual gross salary of £48,000.


1 year ago my wife and I purchased a house and welcomed our second child into the world.



Following the birth of our 2nd child, my wife left her job as she wanted to stay at home with the kids. She claimed child tax credits. I picked up overtime at work when it was available in order to help rebuild our savings.


I didn't keep much track of it as some months there was no overtime, other months I was doing 72 hour weeks. Turns out I earned around £67,000 gross. I have registered for self assessment online and am waiting my P60 to arrive to confirm the figures before I speak with them.


If you've been in this situation before:



Do HMRC adjust my tax code for this year?


Or


Do they want the full amount back in one go?



Thanks.

Comments

  • Rubyroobs
    Rubyroobs Posts: 866 Forumite
    First Anniversary First Post Name Dropper
    edited 19 April 2019 at 11:46PM
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    I don't understand why the claim was ever made in the first place with an income of 48k or how anything has been paid when you were clearly way over the earnings threshold for the previous year.
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
    Uniform Washer
    edited 20 April 2019 at 8:12AM
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    As the op hasn't mentioned (paid for) childcare costs I think they are highly likely to be confusing tax credits with Child Benefit.

    And is concerned about the High Income Child Benefit Charge. If it is HICBC
    Do HMRC adjust my tax code for this year?

    Or

    Do they want the full amount back in one go?

    Then the op should Google "adjusted net income" and do some reading.

    In response to the two questions. Any adjustment to this year's tax code (2019:20) will only be to collect extra tax owed for this year (2019:20), not last year's tax/HICBC.

    If the Self Assessment return for 2018:19 is filed no later than 30 December 2019 then the op has two options regarding any tax/HICBC due.

    If it is less than £3,000 and they are still earning good money then the tax/HICBC owed can be included in the tax code for 2020:21 and paid off over 12 months (extra PAYE tax deductions).

    Or it can be paid direct to HMRC by 31 January 2020. Pay late and interest will be charged and potentially a late payment penalty.
  • perfectspiral
    perfectspiral Posts: 27 Forumite
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    Year 16/17 I earned £33k which is when we had our first child and first claimed child tax credits.


    Year 17/18 I earned £40k.


    Year 18/19 I was expecting to earn £48k which is still under the £60k threshold before having to repay all child tax credits, I believe £50k to £60k earnings you pay back a percentage.


    Unexpectedly earning £67k year 18/19 means I will have to pay it all back, which is where I am wondering if HMRC will want the full amount in one hit, or if they will adjust my taxe code for 20/21 instead.
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
    Uniform Washer
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    So is it tax credits or Child Benefit?

    Or was it tax credits and you were unaware you will also have to (probably) pay back any Child Benefit received in 2018:19.

    Note anything owed for tax credits will not be collected through your tax code
  • perfectspiral
    perfectspiral Posts: 27 Forumite
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    Dazed_and_confused wrote: »
    As the op hasn't mentioned (paid for) childcare costs I think they are highly likely to be confusing tax credits with Child Benefit.

    And is concerned about the High Income Child Benefit Charge. If it is HICBC



    Then the op should Google "adjusted net income" and do some reading.

    In response to the two questions. Any adjustment to this year's tax code (2019:20) will only be to collect extra tax owed for this year (2019:20), not last year's tax/HICBC.

    If the Self Assessment return for 2018:19 is filed no later than 30 December 2019 then the op has two options regarding any tax/HICBC due.

    If it is less than £3,000 and they are still earning good money then the tax/HICBC owed can be included in the tax code for 2020:21 and paid off over 12 months (extra PAYE tax deductions).

    Or it can be paid direct to HMRC by 31 January 2020. Pay late and interest will be charged and potentially a late payment penalty.


    You are entirely correct, I have indeed mixed up child tax credits and child benefit payments. I can only apologise. Thank you for confirming repayment options at the end of your replay, it is much appreciated. :beer:
    I am researching private pensions as we speak regarding a reduction of net income as well.
  • perfectspiral
    perfectspiral Posts: 27 Forumite
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    Dazed_and_confused wrote: »
    So is it tax credits or Child Benefit?

    Or was it tax credits and you were unaware you will also have to (probably) pay back any Child Benefit received in 2018:19.

    Note anything owed for tax credits will not be collected through your tax code


    It is entirely child benfit, we have never claimed any tax credits at all, I completely messed up the terminology.
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
    Uniform Washer
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    I am researching private pensions as we speak regarding a reduction of net income as well.

    Pension contributions can be very useful when it comes to HICBC (and higher rate tax) but there a few things to remember which often seem to cause a bit of confusion.

    You cannot claim tax relief in respect of salary sacrifice contributions. That is because,
    A). You don't pay into the pension your employer does.
    B). Your P60 would already take into account the lower income i.e. pay £80k salary sacrifice £15k = P60 pay £65k

    You cannot claim tax relief in respect of "net pay" pension contributions. See point B above.

    For personal/stakeholder/SIPP pensions you do include these on your Self Assessment return but they have different consequences. They do not reduce your taxable income. But they do reduce your adjusted net income, which is what HICBC is based on.

    For income tax purposes they increase the amount of basic rate tax payable, which in turn can reduce the amount of higher rate tax payable.

    It might be that your return will result in some HICBC being payable but the overall liability being reduced by higher rate pension tax relief.

    And don't forget to include other taxable income such as savings interest (not ISA's though).
  • perfectspiral
    perfectspiral Posts: 27 Forumite
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    Thank you for this, lots of reasearch to do.
  • xylophone
    xylophone Posts: 44,422 Forumite
    Name Dropper First Anniversary First Post
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    I am researching private pensions as we speak regarding a reduction of net income as well.

    Your employer offers a pension? Have you contributed to your pension in the tax year 2018-19?

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

    https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/reduce-high-income-child-benefit-charge/
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