With employees being in high demand at the moment, your employer may consider giving you a pay rise, or even a bonus this Christmas.
Or you may have been self-employed last year and received the Self Employment Income Support grant due to Covid.
These are just two examples of how your gross income/profits could have been under £50,000 in the past, but exceeded that this year.
Income in excess of £50,000
If your income is now £50,000 or more and you have claimed child benefit, it is likely you will have to repay it.
It may be that you personally have not received the child benefit, but that it was paid to your partner. Please do check with them, as the onerous to pay back any of the child benefit falls on the higher tax payer.
It is your responsibility to declare this child benefit to HM Revenue & Customs (HMRC) when your income is £50,000 or over.
How much do you have to pay back?
The amount you will need to repay depends on both the amount you have received, and your total income, over the £50,000 threshold. The tax charge equates to 1% of the child benefit paid for every £100 of income between £50,000 and £60,000.
If you earn more than £60,000, you will need to pay back the entire amount of child benefit you have received.
For example: You have two children, and income of £56,000. You have received child benefit of £1,788.80. You will need to repay back £1,073.00 to HMRC.
What if I don’t do a tax return?
If you do not usually submit a tax return, you need to register by October 5, following the tax year in which you need to pay the tax charge.
If you already do a tax return, make sure you include the child benefit you have received.
Should I claim the child benefit if I earn more than £50,000?
You should still register your child for child benefit and you can then elect not to receive the payments.
By registering your child for child benefit, your child will automatically receive their national insurance number once they are aged 16.
What if my partner or ex-partner will not tell me their income?
You can write to HMRC to ask whether your partner or ex-partner receives child benefit, or has a higher adjusted net income than you. HMRC will reply ‘yes’ or ‘no’ – they will not give you any financial information.
You can only ask for this information if you and your partner either live together, or separated within the tax year you want information for.
Got any questions?
Please always seek professional advice. before taking any action. We are happy to answer questions in future issues. Please send your questions via our contact page.
Chantal Baker, is the director and founder of Champ Consultants Ltd, an accountancy and tax consultancy practice in Caterham. Please follow us on the various social media channels