This piece first appeared in the money section of the Saga website on 8 October 2013
The text here may not be identical to the published text

 

ACT NOW TO AVOID FINES LATER

If you get child benefit and you or your partner has an income above £50,000 then the one with the higher income has to register for self-assessment and pay the tax due on it.

The Chief Executive of Her Majesty’s Revenue & Customs (HMRC) Lin Homer recently told people to ‘get off their backsides’ and register before the deadline which was 5 October. But in fact as long as you get ON your backside in front of your computer you can still avoid any fines for being late.

If you got child benefit between 7 January and 5 April 2013 and you or your partner (husband, wife, civil partner or live in lover) had a taxable income in 2012/13 of more than £50,000 then the person with the higher income will pay tax to take away some or all of the child benefit received. The tax will equal the child benefit if one partner has an income over £60,000. Between £50,000 and £60,000 the tax is on a sliding scale – so for example an income of £55,000 will mean tax is half the child benefit.

The assessment is done on the higher income. The other income is ignored. Two partners who both have £50,000 will not have to pay. But one with an income over £60,000 will pay the full tax. A partner’s income is counted even if they are not related to the children. The same rules apply for this tax year 2013/14.

In order to pay the tax you have to register for self-assessment and fill in an online form by 31 January. The tax is also due on that date. You should have registered by 5 October – but that date has passed. So in theory you could be liable to a fine for ‘failure to notify’ which can be up to 100% of the tax due. However, as long as you meet the 31 January deadline for registering, filling in and submitting the form and paying all the tax due then the fine will be zero.

The income that is used for the assessment is called ‘adjusted net income’ though in fact it is basically your taxable income. You can find that figure on your P60 which your employer gives you at the end of each tax year. If it is £50,000 or less you can relax! If it is more you may still not have to pay. Deduct from it any pension contributions made outside work and any Gift Aid donations to charity (gross both up before you take them away). If the result is £50,000 or less then again you won’t have to pay the charge or register for self-assessment. If it is more than £60,000 then the tax will equal the child benefit.

All the weird child benefit high income charge rules are explained in my blogpost http://paullewismoney.blogspot.co.uk/2012/11/child-benefit-high-income-charge.html

Or find your way through the HMRC pages http://www.hmrc.gov.uk/childbenefitcharge/ and use the useful calculator at https://www.gov.uk/child-benefit-tax-calculator


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