Child Benefit Tax Charge

[The Rotrex Kid]

pacenotes said:

I expect the threshold to go up on Wednesday.

They need the middle voters next year.

You'd think it would get more people onside than cutting bloody inheritance tax!

[KTF]

WhiskyDisco said:

You should contribute £13,000 into your pension such that your Gross salary before tax and NI is £49,999

Yes, that was my next plan to lower it under the threshold but might be worth waiting until Wednesday as another reply said.

I already do that via salary sacrifice with employer matching the contributions but I can up the % if needed although there no matching contributions.

[Eric Mc]

DaveH23 said:

Eric Mc said:

It's based on GROSS (before tax) income.

Isn't it net adjusted so salary sacrifice lowers the amount?

That was my understanding.

Yes - but that is not the normal definition of "Net Income". "Net" usually means "after tax". In this case we are really describing "Gross Income after deduction for Pension Contributions".

It can get confusing.

[WhiskyDisco]

They just mean net after sacrificing.

[alangla]

All I can say is that this makes it feel like HMRC and the government see you as a piñata hanging in front of them especially when you live in Scotland. Get kicked for 42 (not 40!)% tax plus 12% NI once you clear £43k, finally get to £50k and have your NI drop back to something more reasonable then get hit with this plus, as a further boot in the balls, we finally get to a state where savings are starting to pay out only for HMRC to say “you know what? You’re making over £50k, we’re going to half your savings interest allowance, help ourselves to 42% of whatever you’ve made over it, then we’re going to hit you for a child benefit clawback”

I voluntarily declared that I’d gone past £50k last year to avoid the situation some of the posters further up have experienced with a big bill. My reward for filling in self-assessment has been getting my tax code changed to half my personal allowance halfway through the year. Nearly £200 a month out of last month’s pay packet. How the fk is that fair and it’s a fking Tory policy! The SNP hoovering 54 or so percent is a kick in the balls, the Tories helping themselves to what I’ve calculated at nearer 60% is a proper head-stamping. Honestly. I’m currently in a position where if I or my Mrs were to go out and do a few hours in a supermarket for extra cash, she’d get about £11 an hour, I’d get about £4! Tell me that’s fking fair and tell me it’ll ever get better under Starmer/Sarwar.

Yes I know, 1/10, needs more swearing.

[MountainMutant74]

I was sent a letter a few years back from HMRC claiming 6 years worth of child benefit wrongly paid. Salary had gone up over the years and I was under the impression the benefit was being repaid by my tax code.

Wrong.

I ended up having to pay back over £12k after fines and interest on unpaid monies I knew nothing about.

I am one of the people where I earn not much over the limit and my wife brings in very little and it completely cleared my savings.

Still leaves a bitter taste in the mouth! Make sure you are paying it back!

[The Rotrex Kid]

MountainMutant74 said:

I was sent a letter a few years back from HMRC claiming 6 years worth of child benefit wrongly paid. Salary had gone up over the years and I was under the impression the benefit was being repaid by my tax code.

Wrong.

I ended up having to pay back over £12k after fines and interest on unpaid monies I knew nothing about.

I am one of the people where I earn not much over the limit and my wife brings in very little and it completely cleared my savings.

Still leaves a bitter taste in the mouth! Make sure you are paying it back!

Same thing happened to a colleague of mine a few years back, made me feel 'better' (if you want to call it that) about getting rinsed yearly for it...

[ChocolateFrog]

MountainMutant74 said:

I was sent a letter a few years back from HMRC claiming 6 years worth of child benefit wrongly paid. Salary had gone up over the years and I was under the impression the benefit was being repaid by my tax code.

Wrong.

I ended up having to pay back over £12k after fines and interest on unpaid monies I knew nothing about.

I am one of the people where I earn not much over the limit and my wife brings in very little and it completely cleared my savings.

Still leaves a bitter taste in the mouth! Make sure you are paying it back!

Did you not look at your pay slips?

Is the bitter taste at your own ignorance?

[Eric Mc]

WhiskyDisco said:

They just mean net after sacrificing.

Yes - I know but the expression "net" can be a bit vague.

If a client mentions "net income" to me the assumption is that they are talking about after tax income. If it means something else, they will eventually have to explain.

For instance it can also mean -

Net after tax allowances
Net after salary sacrifice
Net after allowable expenses pension contributions, charitable donations etc)
Net after allowable business costs
Net after Capital Allowances claims

Or a mix and match of the above.

[Eric Mc]

ChocolateFrog said:

MountainMutant74 said:

I was sent a letter a few years back from HMRC claiming 6 years worth of child benefit wrongly paid. Salary had gone up over the years and I was under the impression the benefit was being repaid by my tax code.

Wrong.

I ended up having to pay back over £12k after fines and interest on unpaid monies I knew nothing about.

I am one of the people where I earn not much over the limit and my wife brings in very little and it completely cleared my savings.

Still leaves a bitter taste in the mouth! Make sure you are paying it back!

Did you not look at your pay slips?

Is the bitter taste at your own ignorance?

To be fair, many people (most people in my experience) do not really understand how the PAYE Coding System works and assume that whatever code they have been allocated by HMRC is correct. HMRC take pains to point out that if the taxpayer thinks the code is not correct, it is THEIR responsibility to notify HMRC that the coded is wrong. In other words, it is up to the taxpayer to notify HMRC of HMRC's own errors.

[KTF]

Another question

As I had to register for self assessment to calculate the charge which has to be paid by January, if I stop getting child benefit (assuming no other change in circumstances), do I still have to do self assessment every year even if its just going through and ticking all the 'no' boxes or could I stop doing it until HMRC send me another letter?

[MountainMutant74]

I pay it back through tax now but it does not show on my payslip. It's just a tax code that means nothing to me.

But now I have self assesment forms and click for it to be taken via tax code

[Eric Mc]

KTF said:

Another question

As I had to register for self assessment to calculate the charge which has to be paid by January, if I stop getting child benefit (assuming no other change in circumstances), do I still have to do self assessment every year even if its just going through and ticking all the 'no' boxes or could I stop doing it until HMRC send me another letter?

Once it's obvious that there is no further reason that you don't need to complete a Self Assessment tax return, HMRC MIGHT drop the requirement. However, they do have a habit of leaving you on the system so you might have to speak to them directly.

You will need to continue to submit an SA return for ANY tax year in which you have received the Child Benefit and your earnings exceed the thresholds.

So, if you stop receiving the benefit in (say) June 2024, then you will have received Child Benefit in tax year 2024/25 and you will need to somplete a tax return for that year.

[Eric Mc]

MountainMutant74 said:

I pay it back through tax now but it does not show on my payslip. It's just a tax code that means nothing to me.

But now I have self assesment forms and click for it to be taken via tax code

It is VITAL that ALL PAYE taxpayers learn how to interpret tax codes. It is a major blank spot in the UK tax system that so many taxpayers are totally ignorant of how their taxes are calculated. Make an effort to find out what it means. As I said earlier, if it's wrong, it's YOUR fault.

[MountainMutant74]

I should add the bitter taste is not the paying it back, it's

'six years ago you received child benefit you shouldn't have (but you weren't aware of). Here is a several hundred pound fine for that and here is 6 years of interest on the benefit you received. x6

[KTF]

Eric Mc said:

Once it's obvious that there is no further reason that you don't need to complete a Self Assessment tax return, HMRC MIGHT drop the requirement. However, they do have a habit of leaving you on the system so you might have to speak to them directly.

You will need to continue to submit an SA return for ANY tax year in which you have received the Child Benefit and your earnings exceed the thresholds.

So, if you stop receiving the benefit in (say) June 2024, then you will have received Child Benefit in tax year 2024/25 and you will need to somplete a tax return for that year.

Ok, if I were to stop it from tomorrow then I would have to fill it in again next year to pay the charge for the part of this year 23/24 that I have already been receiving it.

Then call them up after April 2024 and see what they say about de-registering me.

[duckson]

WhiskyDisco said:

You should contribute £13,000 into your pension such that your Gross salary before tax and NI is £49,999

There is other things to consider to keep under the £50k from a HICBC perspective such as non-ISA bank interest.

[KTF]

I can see why people have accountants, etc now to deal with this sort of thing

So you can take off any tax on interest paid outside of your savings allowance for non-ISA savings? Aren't losses on investments able to be taken off as well or is that for something else?

[duckson]

KTF said:

I can see why people have accountants, etc now to deal with this sort of thing

So you can take off any tax on interest paid outside of your savings allowance for non-ISA savings? Aren't losses on investments able to be taken off as well or is that for something else?

No you ADD on ANY non-ISA interest you have accrued in that tax year to your total earnings.

[alangla]

duckson said:

No you ADD on ANY non-ISA interest you have accrued in that tax year to your total earnings.

In short, given interest rates are now respectable, put every penny you can into an ISA or NS&I tax-free product, or HMRC will help themselves to about 60% (assuming you’ve got 2 kids) of what you make after the first £500 in interest.