Our experts at DSR Tax Claims know how hard it is to find good, quality information about HMRC’s tax regulations that is easy to understand, and that’s why we have created these handy guides to tell you everything you need to know. Our aim is to make life easier for our clients and that is why we want to share our expertise with you. You can also call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.
What is the High Income Child Benefit Charge?
Child Benefit used to be what is called a universal benefit. This means that anyone with qualifying children would be entitled to claim this benefit, no matter what their income level was. From January 2013, this changed from being a universal benefit to one that was targeted towards families which didn’t include high earners. This means that HMRC now levy a tax charge on those high earners who also receive child benefit, known as the High Income Child Benefit Charge.
If you have an income of over £50,000 and either you or your partner receive child benefit, you may now have to pay a tax charge called the High Income Child Benefit Charge. You may also have to pay the tax charge if someone else gets Child Benefit for a child who lives with you if that other person contributes at least an equal amount towards the upkeep of the child. As far as HMRC are concerned, it makes no difference whether the child living with you is your biological child or not – if these circumstances apply to you, you may still have to pay the tax charge even if the child is not your child.
What can you do if you are affected by this tax charge?
You have the right to choose not to receive Child Benefit if you don’t want to be hit with this tax charge, although HMRC recommend that you still fill in the claim form even if you aren’t going to claim the money. You will still be entitled to receive National Insurance credits even if you don’t claim the Child Benefit and this can help contribute towards your State Pension.
If you are already getting Child Benefit, you can either choose to’ opt out’, which means stop receiving it, or you can continue to receive Child Benefit and then pay the High Income Child Benefit Charge at the end of each tax year.
You need to work out your ‘adjusted net income’ to check whether your income is over the threshold for this tax charge. Your adjusted net income is your taxable income, before any personal tax allowances have been deducted, minus any deductions such as Gift Aid or cycle scheme deductions. The HMRC website has a Child Benefit tax calculator to help you to calculate your adjusted net income.
How do you pay this tax charge?
If you and your partner both have an adjusted net income over £50,000, whoever has the higher income is the person to pay the tax charge.
To pay High Income Child Benefit Charge, you need to register for Self Assessment even if you don’t usually need to return a Self Assessment tax return. If you are not already registered for Self Assessment, you need to register by 5th October in the tax year following the tax year in which you have to pay the charge.
What if you can’t get any relevant information from your partner or ex-partner?
You might find yourself in the situation of not knowing whether your partner or ex-partner claims Child Benefit or whether they have the higher income. If this is your situation, you can write to HMRC and ask these questions. HMRC won’t go into specific financial details with you but they can provide you with a ‘yes’ or ‘no’ answer so you know whether you need to pay this tax charge. However, HMRC will only give you this information if you live with your partner or you separated from your partner in the tax year for which you are asking the information.
If you find yourself in this situation, you need to write to HMRC with the following information:
- The tax year you are asking about
- Your personal details such as name, address, date of birth and National Insurance number.
- Your UTR (Unique Taxpayer Reference)
- Your adjusted net income
- Your partner’s (or ex-partner’s) name as well as their personal details, if you know them, such as date of birth, National Insurance number, UTR and address.
You need to send this letter to:
Pay As You Earn and Self Assessment
HM Revenue and Customs
How do you stop your Child Benefit?
As mentioned earlier, you can choose to stop receiving Child Benefit if you would rather not be hit with this benefit charge. To do this you can either fill in an online form (you will need a Government Gateway account to do this) or you can contact the Child Benefit Office, either by phone or in writing. To contact them by phone, you need to call 0300 200 3100 (textphone 0300 200 3103), or you can write to:
HM Revenue and Customs – Child Benefit Office
PO Box 1
Newcastle Upon Tyne
If you are registered as an appointee or authorised agent, you can’t use the online form so you would have to use one of the other methods to contact the Child Benefit Office to stop the claim.
Unfortunately, you won’t be allowed to stop your Child Benefit if you are using it to pay back an overpayment or if it is being used to pay back certain other benefits you have received in the past from another country.
If you do decide to stop claiming Child Benefit to avoid being hit with the High Income Child Benefit Charge you will still have the following responsibilities:
- You will still have to pay any tax charge which you owe for any tax years up to the date your Child Benefit stops. The online calculator can show you how much you owe for each tax year and when you need to pay it.
- You will still have to report any changes to your family life that may impact on your Child Benefit entitlement, even after you stop claiming it. This includes any change to your relationship status, changes to your personal details such as address or bank account details, if you have any more children or if you no longer reside in the UK. The GOV.UK website gives details of all the changes you need to inform them of.
Can you restart your Child Benefit if you have previously stopped claiming it?
You can restart your Child Benefit claim whenever you like – stopping it doesn’t have to be a permanent choice. If it suits your family circumstances better to restart your claim, it is pretty easy to do. All you need to do it fill in an online form on the HMRC website or contact the Child Benefit Office by phone or post (the contact details are the same as for stopping your Child Benefit).
As with stopping Child Benefit, if you are authorised as an appointee or authorised agent of the person who wants to restart their Child Benefit, you can’t use the online forms method.
Your payments will usually restart on the Monday after your request is received by the Child Benefit Office, and they will write to tell you if you are entitled to any backdated Child Benefit, and if so, how much.
If you restart your Child Benefit, you will be expected to fulfil the following responsibilities:
- You or your partner (whichever one of you is liable) will have to pay the tax charge on the benefit received after the restart date if your income is over £50,000.
- You will be expected to report any changes to your family circumstances, just as with stopping your Child Benefit. The changes you need to inform them of are detailed on the UK website.
What happens if your circumstances change?
Depending on how your circumstances change, you may or may not continue to be liable for the High Income Child Benefit Charge.
If your income changes:
If your income drops and is no longer above £50,000 for the tax year, you will no longer have to pay the High Income Child Benefit Charge. If your income goes above the £50,000 threshold, you can choose whether to continue still receiving Child Benefit. You have the right to stop or restart your Child Benefit at any time as suits your family circumstances. The Child Benefit tax calculator can tell you how your income affects the tax charge.
If you have a new child:
Claiming Child Benefit has other benefits as well as the financial benefit. As well as receiving the money, claiming Child Benefit also entitles you to National Insurance credits which will protect your entitlement to a State Pension as well as help you qualify for benefits such as Guardian’s Allowance. It also proves that you or your partner have the financial responsibility for supporting another child, which may reduce any child maintenance you have to pay for any children who don’t live with you. You need to decide what works best for your family and your unique circumstances. If you don’t want to be hit with the tax charge though, you can send a Child Benefit claim form but tick the option to ‘not have the benefit paid’. That way you will still retain the benefits such as National Insurance credits without having to pay the High Income Child Benefit Charge.
If your partner moves out:
If your income is more than £50,000 and you move in, or split up with, someone who claims Child Benefit, it could affect your tax situation. If your income is more than £50,000 and is higher than your new partner’s income, you will have to pay the High Income Child Benefit Charge – your new partner will pay it if their income is the highest. The tax charge will apply from the date you and your partner move in together. You will no longer be liable for the charge from the date when either you permanently separate or the Child Benefit stops, maybe because you have chosen not to receive it or when child becomes too old to qualify for it. The separation needs to be permanent – short periods apart, such as hospital stays or working away from your home, don’t count.
How can DSR Tax Claims help?
We aim to make life as simple as possible for our clients and that includes giving you the information you need to make your taxes (and your life) simpler and less stressful. Our team of experts at DSR Tax Claims are always on hand to help our clients and our excellent standing with HMRC means that we can make sure you don’t fall foul of their regulations, while claiming your maximum tax relief. We can even take care of all that paperwork and deal with HMRC on your behalf too. Call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.