Over the last month, HM Revenue and Customs (HMRC) have been writing to higher rate taxpayers to remind them that if their income is over \u00a350,000 and they or their partner received Child Benefit in 2012\/13 they will need to complete a tax return for the 2012\/13 year. With the 31 January 2014 deadline looming we are all now becoming acutely aware of the problems and pitfalls in reporting Child Benefit.<\/p>\n
The High Income Child Benefit\u00a0 Charge (HICBC) starts to kick in on income over \u00a350,000 and it effectively \u2018claws back\u2019 1% of the child benefit for every 100 your income exceeds this threshold. So if you earn over \u00a360,000 the charge becomes equal to the amount of child benefit received. The charge is disclosed on your self assessment tax return \u2013 which means anyone not issued with a return had to register by 5 October this year. The option to opt out of receiving child benefit was available however many inevitably missed this deadline and now find themselves caught in the cycle of self assessment.<\/p>\n
This has been a popular issue for commentators since its introduction on 7 January 2013, with many describing the unfairness with the example of a couple both earning \u00a349,950 keeping their Child Benefit, whilst a single earner on \u00a350,500 starting to lose it.<\/p>\n
However, it is not just the monetary charge itself that is causing issues; there are also more practical concerns to consider:<\/p>\n
Because the child benefit charge needs to be declared on the tax return of the higher earner, the ethos of \u2018self-assessment\u2019 comes into question. For couples who do not readily share their financial details there is a problem in accurately completing their tax returns. This will be particularly noticeable if the income of one partner fluctuates year on year.<\/p>\n
HMRC defines a \u2018partner\u2019 as a person you are married to and living with or a person you are living with as if you are married. Therefore, you may be liable to the child benefit charge for a child who is not your own.
\nAfter weighing up all the facts you may just decide to cancel the payments to avoid the extra administrative burden. However even in this scenario there are consequences. If you cancel your child benefit payments but your partner does not work they could lose their entitlement to state pension benefits.<\/p>\n
If there are any issues above that you wish to discuss further, please do not hesitate to contact one of the tax team at Goodman Jones.<\/p>\n","protected":false},"excerpt":{"rendered":"
Over the last month, HM Revenue and Customs (HMRC) have been writing to higher rate taxpayers to remind them that if their income is over \u00a350,000 and they or their partner received Child Benefit in 2012\/13 they will need to complete a tax return for the 2012\/13 year. With the 31 January 2014 deadline looming[…] <\/p>\n