Child benefit warning: Claimants may face higher income tax bills – full details
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Child benefit can be claimed by anyone responsible for a child and there is no limit on how many children can be claimed for. Currently, claims for an eldest or only child will bring in £21.05 per week.
Any claims for additionally children will generate £13.95 per child.
These payments can only be received by one person but when assessing eligibility, both parents income will be looked at.
Where claimants and their partner both earn less than £50,000 a year, they’ll receive the full amount of child benefit without having to pay any of it back.
However, if either parent earns more than £50,000 a year, a portion of the child benefit will need to be paid back in extra income tax.
Where a person earns between £50,000 and £60,000 a year, they’ll have to pay more income tax to repay a portion of child benefit they’re no longer entitled to.
To do this, they’ll need to fill in a tax self-assessment and send it to HMRC.
The person involved will need to pay back one percent of the family’s child benefit for every extra £100 earned over the £50,000 threshold.
So, for example, if a person earns £51,000 a year they’ll be £1,000 (10 x £100) over the limit.
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As such, the extra tax is 10 percent of the child benefit payment of £20.70 a week, so they’ll need to pay an extra tax of £107.64 a year (£2.07 x 52).
Where a person earns over £60,000 a year they’ll need to repay all of their child benefit through income tax.
To work out how much will be owed a free-to-use child benefit tax calculator can be accessed from the government’s website.
With these potential costs for high earners, consideration should be given before any action is taken but it should be noted there are benefits in receiving child benefit even if payments are forgoed.
Child benefit can be claimed while forgoing the actual payments which will result in no tax being due.
This could be beneficial for claimants who may not be working and instead are staying at home to raise the child.
This is because claiming for a child while not working can provide claimants with National Insurance credits.
These credits will count towards a state pension record as the claimant will not be able to build contributions through work.
Claims for child benefit can be made from as soon as the child’s birth is registered.
It can take up to 12 weeks to process a new claim but they can also be backdated by up to three months.
Initial claims must be made by completing a “CH2” form and sending it to the child benefit office.
Additional children can also be added to an existing claim by calling the child benefit helpline.
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