Child benefit. Did you miss the deadline?
Most people will now be aware that higher earning parents will be entitled to less child benefit from today, but it seems that rather a large number of parents are unaware that this will draw them into completing Self-Assessment tax returns.
HMRC estimates that there are around 700,000 households with one parent earning over £60,000. HMRC wrote to higher earning child benefit recipients giving them a deadline of 6th January to opt out of receiving child benefit or pay the Higher Income Child Benefit Charge (HICBC) where one parent earns over £50,000. From today where a parent continues to receive child benefit it will be repayable as HICBC at a rate of 1% of child benefit paid for every £100 of income over £50,000.
Around 200,000 taxpayers took the opt-out and will no longer be paid child benefit. The remaining 500,000 will continue to receive child benefit but will have to declare this on a Self-Assessment tax return.
For the self-employed this is just another minor irritation, but the mechanism of benefit receipt and then repayment will be more of a problem to those unfamiliar with the Self-Assessment process, mainly the employed. It will be interesting to see how many fail to realise their obligation to provide a tax return.
So what can you do if you were one of those who missed the deadline?
Well first of all, don’t panic, tax returns are not due until the end of next January. That is not the only option though. It is worth considering whether you can reduce your income, particularly if your income is between £50, 000 and £60,000. This can be achieved by paying additional pension contributions, making more gift aid donations or taking up any salary sacrifice opportunities. The negotiation of additional holiday time could be worth a considerable amount if you consider the cost of losing child benefit.