HMRC collects £3b from Child Benefit taxes as more families are to be hit – get ready


Child Benefit can be claimed by anybody who is raising children but for those on higher incomes, a tax charge may be levied. Those earning over £50,000 per annum will need to repay a portion of their Child Benefit back through their income tax, while those who get more than £60,000 will have to pay it back in its entirety.

According to a recent Freedom of Information request, HMRC collected £409million from this tax in 2019/20, the latest tax year available due to self-assessment deadlines.

According to analysis from NFU Mutual, this was down three percent from the £421million it collected in each of the previous two years, with the total tax collected from (HICBC) reaching £2.92billion.

Additionally, the Government also saved an estimated £4.89billion from families opting out of child benefit to avoid the charge, taking the total savings and earnings for the Government to £7.81billion.

There were 354,000 families who paid the tax in 2018/19, but even more are opting out of receiving the payment.

READ MORE: Rishi Sunak’s ‘subtle’ inheritance tax change sees payments soar £500m

Mr McCann continued: “It’s crucial families who don’t want the hassle of repaying child benefit still register a claim before opting out of receiving payment. This ensures that a non-working parent receives a national insurance credit, helping to protect their state pension entitlement.

“It’s vital that the claim is made by the non-working payment, rather than the high-earning partner. Families with non-working parents failing to register for child benefit could be counting the cost many years in the future.”

See also  Sebi wants MFs to invest only in listed securities; exposure to unrated debt to be capped at 5%

This guidance may need to be heeded by more families over the coming months as recently released data from the ONS shows people are, on average, beginning to see their wages rise.

Average weekly earnings for August 2021 were released recently and the figures showed the growth in average total pay, including bonuses, was 8.8 percent. while regular pay excluding bonuses was 7.4 percent among employees for the three months April to June 2021.

The ONS noted annual growth in average pay is being affected by temporary, coronavirus-related factors that have inflated the increase.

Nevertheless, these raises may push some basic rate taxpayers into the higher band, where the HICBC comes into effect.

Currently, basic rate taxpayers are those who earn between £12,571 to £50,270.

Higher rate taxpayers earn between £50,271 and £150,000 and face 40 percent income tax costs.

Money Helper, the public financial advisory service, broke down how costly the HICBC could be for higher earners.

Affected claimants will need to pay back one percent of their family’s Child Benefit for every £100 earned over £50,000 each year.

So, for example, if a claimant earns £51,000 a year their income is £1,000 (10 x £100) over the limit, so the extra tax is 10 percent of their Child Benefit of £20.70 a week.

As a result of this, the claimant would pay extra tax of £107.64 per year (£2.07 x 52).





READ SOURCE

LEAVE A REPLY

Please enter your comment!
Please enter your name here