Parents or guardians who are claiming child benefit where one or both earn over £50,000 may have to file a tax return in order to pay a High Income Child Benefit Tax charge (HICBC).
The responsbility falls on the individual with the higher income, so if both people earn over £50,000, the individual with the higher income would need to file a tax return to pay the charge.
Child benefit is paid to children up to the age of 20 and pays from £20.70 for the first child and £13.70 for each additional child - per week.
A family with two children would receive £1,780 per year. If any parent in that family earns over £50,000, and the family hasn't opted out from receiving the benefit, then that parent would be required to file a tax return and repay the benefit via the HICBC.
The government has warned parents to opt out from child benefit payments if they are earning over the threshold but to remain eligible for it. This is confusing but essentially allows national insurance credits to continue accruing and the child to automatically receive a national insurance number around their 16th birthday.
The taxman has written to 60,000 people since April 2018 to warn that they would be required to file a tax return as they claimed child benefit last year but were earning above the threshold. In addition, 40,000 people are being contact in relation to tax years prior to last year for unpaid HICBC.
If you/your partner has been claiming child benefit, and either of you are earning above £50,000 then check to make sure you have either opted out from receiving payments or are planning to submit a tax return prior to January 31st to pay the HICBC.
The tax charge is worked out proportionally based on the amount of child benefit received and the amount your income has exceeded £50,000. You would repay 100% of the child benefit received if your income was at/over £60,000.
That calculation would be:
Amount over £50,000 divided by 10,000 multiplied by benefit received in the tax year.
e.g. 55,000 income, would be 5,000 over 50,000. 5,000 divided by 10,000 is 0.5. If you received £1,000 then the charge would be £1,000 x 0.5 = £500.