Self-Assessment Tax Return Child Benefits: What You Need to Know

Child benefit is a payment that you can claim for your child under 16 or under 20 if they stay in approved education or training. It is tax free if you or your partner individually earn less than £60,000 per year. It's usually paid every four weeks but, in some cases, can be paid weekly. The amount you get depends on how many children you have. Only one parent can get child benefit for a child.

Understanding your self-assessment child benefit obligations is crucial. Child benefit is a great tax-free benefit for parents but if you or your partner individually earn more than £60000, you might need to pay back some or all the benefits received to the government. This is known as high income child benefit charge.

How much is the Child Benefit?

The child benefits in UK is £25.60 for your eldest child per week and £16.95 per week for each of your other children. You can calculate how much money you get from child benefit in a tax year through HMRC child benefit calculator.

High Income Child Benefit Charge

As discussed earlier, if you or your partner individually earn more than £60000, you might need to pay back some or all the benefits received to the government, which is known as high income child benefit charge. You also have to pay this charge if someone else gets the child benefit for a child that is living with you, and they contribute at least an equal amount towards child upbringing. It doesn’t matter if the child living with you is not your own child.

How do you know you will be charged?

You might be charged if your adjusted net income is above the threshold. However adjusted net income of your partner will also have to be considered (in case if both of your adjusted net income is above the threshold). So, the best way to find out is to see if your adjusted net income is over the threshold of £60000 or not. Your adjusted net income is your total taxable income (including interest from savings and dividends) before any allowances and any gift aids.

If you are still unsure of how to calculate your adjusted net income, then you can use child benefit calculator.

Who pays high income Child Benefit Charge?

If both of you and your partners income is over the threshold i.e. £60000, whoever has the higher income has to pay the charge. It doesn’t matter who actually received the child benefit.

The person who has to pay the charge will need to

• Register for self-assessment by Oct 5^th (if not already registered) following the end of the tax year when the child benefit is received.
• Submit the self-assessment return by following Jan 31^st after the end of the relevant tax year.
• Pay back all or part of the child benefit as income tax (depending upon the income of the higher income generating spouse)

You can get a penalty if you do not register for Self-Assessment or do not declare child benefit on your Self-Assessment tax return.

How to calculate high income child benefit charge?

The charge is worked out according to a fraction:

Choice for Individuals

There lies a choice with individuals of whether to claim tax benefits or not claim at all in first instance. They can choose either to:

• To get child benefits and pay any charge at the end of the tax year.
• Do not claim any child benefit and not pay the tax charge.
• Still fill in the Child Benefit claim form but choose to not get the Child Benefit payments (generally the best option).
• The advantages of third option are

• You get National Insurance credits – which protects your rights to the state pension (very important if you’re on a low income)
• Your child will also receive a National Insurance number right before they turn 16 – they won’t need to apply for one themselves
• Your Child Benefit payments are “protected” in case your income drops

With the third option you get all the benefits, but you don’t need to worry about filing a tax return or paying HICBC.

What if you cannot get information from your partner or ex-partner?

If you don't have information about whether your partner or ex-partner receives Child Benefit or has a higher income, you can contact HMRC by writing to ask. HMRC will provide a yes/no answer but will not disclose financial details. This is possible if you both live together or separated during the tax year you’re inquiring about. When you contact HMRC, make sure you provide HMRC with the required information.

What if you are already getting Child Benefit Payments?

If you're already receiving Child Benefit payments, you can choose to either continue receiving them and pay the tax charge at the end of the tax year or opt out. To opt out, you can:

• Use the online service or fill in an online form.
• Contact the Child Benefit office by phone or post.

Once you opt out, you'll need to pay any charges due up until the opt-out date. Even after opting out, you must inform HMRC of any changes in your circumstances that may affect your Child Benefit entitlement.

These changes could include your child moving out, leaving approved education, or being admitted to hospital or care, etc.

What if you want to restart your Child Benefit Payments?

If you have previously opted out from child benefit payments, you can still restart your child benefits if you still qualify the required criteria mentioned above. To restart, you can follow the same process as of opting out.

When will you start getting payments?

If you have previously opted out of Child Benefit payments, you can restart them if you still qualify. To restart, follow the same process as opting out.

It may take up to 28 days for your first payment after your request is processed. HMRC will inform you of any backdated payments you’re entitled to. If you or your partner’s income is still above the threshold, you will have to pay the High-Income Child Benefit Charge on the restarted payments. You will also need to report any changes in your circumstances to HMRC.

The changes might include your child moving away from home, your child leaving approved education, your child going into hospital or care, your change in income, etc.

When Circumstances Changes

There might be changing circumstances which might affect your child benefit payments as well as your High-Income Child Benefit Charge. Few common changing circumstances are discussed below:

Change in Income – If both yours and yours partners individual adjusted net income falls below the threshold, you will not have to pay the HICBC.

A Partner moving out – If you and your partner both have incomes above the threshold, the higher earner must pay the charge, even if you separate temporarily. The charge applies until you permanently separate or the Child Benefit payments stop.

Conclusion

In conclusion, if your or your partner's income exceeds the specified threshold, you may be liable for the High-Income Child Benefit Charge. You have the option to either continue receiving Child Benefit and pay the charge or opt out of payments while still maintaining eligibility for benefits such as National Insurance credits. It's essential to report any changes in your circumstances to HMRC and pay any owed charges through Self-Assessment. For further guidance, you can use the Child Benefit tax calculator to estimate your potential tax charge.