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Child Benefit & Self Assessment

Child Benefit & Self Assessment

The new High Income Child Benefit tax charge was introduced on 7 January 2013 by HMRC.

This means that there now may be a need for you to complete a self assessment tax return.

So am I affected and do I need to complete a self assessment return?

For the purposes of the High Income Child Benefit tax charge, HMRC stipulate that you will be affected by the charge and required to complete self assessment if:

  • You have an individual income of more than £50,000 and are entitled to receive Child Benefit.
  • You have an individual income of more than £50,000 and live (or have lived) with a partner who’s entitled to receive Child Benefit.
  • Both you and your partner have an income of more than £50,000 per year, you have the higher income and one of you is entitled to receive Child Benefit.
  • you jointly decide to keep receiving Child Benefit and pay the new tax charge.

You will also be affected if during a tax year you have an individual income of more than £50,000 and both of the following apply:

  • Someone else is entitled to receive Child Benefit for a child who lives with you.
  • They’re entitled because they contribute at least an equivalent amount of Child Benefit towards the child’s upkeep, for example pocket money or clothes.

It doesn’t matter if the child that is living with you is not your own child.

Your income will generally be your income before tax and deduction of ‘Personal Allowance’.

How does the tax charge work?

The amount of tax charged is dependent on the amount of Child Benefit entitlement and the level of your ‘adjusted net income’.

The tax charge will also differ depending on your income.

If you earn between £50,000 & £60,000, the tax charge is 1% of the full Child Benefit on income between £50,000 and £60,000.

If however your individual income is £60,000 or more, then the tax charge will be equal to the full amount of Child Benefit you or your partner received, irrespective of who receives the benefit.

So what do I do and how to I go about it?

You will need to choose to do one of the following:

  • keep receiving Child Benefit payments – but if you do you will need to declare the amount you or your partner are entitled to by filling in a tax return each year and registering for Self Assessment if you haven’t done so already.
  • tell the Child Benefit Office that you want to stop receiving Child Benefit payments.

If you decide to stop the Child Benefit payments, you will:

  • still need to declare any Child Benefit you were entitled to receive up to the point the payments stopped (the earliest date this can apply from is 7 January 2013).
  • not have to complete a tax return if your Child Benefit payments stop for a whole tax year – unless you need to for other reasons.

Only the person who is entitled to Child Benefit can stop the payments.

Self Assessment and how we can help

For the year ended 05 April 2013, you need to complete a self assessment form before 31 January 2014.

In order to do this you can either register by using the following link Self Assessment Registration

Alternatively, speak to Craig at Pure Contractor Accountants on 01942 734455 or email cbarlow@purecontractoraccountants.co.uk