What You Need to Know if You Claim Child Benefit Tax Credit

I wanted to remind you of an important issue that might affect your tax return if you claim Child Benefit Tax Credit.

Child Benefit is a payment made to parents or guardians to help with the cost of raising children. If you or your partner receive Child Benefit, it's important to report this on your Self-Assessment tax return, especially if your income is over £60,000.

This is because you may be subject to the High Income Child Benefit Charge (HICBC).

If your income exceeds £60,000, you may need to repay some, or all, of the Child Benefit received. This is calculated based on your income and can affect your overall tax liability.

The HICBC is calculated based on the income of the higher earner in the household. For every £200 of income over £60,000, 1% of the Child Benefit received must be repaid. This means that if the income reaches £70,000 or more, the entire amount of Child Benefit received must be repaid.

The UK Government has a Child Benefit tax calculator which allows you to work out how you might be affected.

The taxpayer can choose to stop receiving Child Benefit payments to avoid the charge. However, it is still beneficial to claim Child Benefit even if payments are stopped, as it can help protect the taxpayer's National Insurance credits.

When you claim Child Benefit for a child under 12, you automatically receive National Insurance credits. These credits count towards your State Pension, ensuring you do not have gaps in your National Insurance record if you are not working or do not earn enough to pay National Insurance contributions.

You need 35 qualifying years of National Insurance contributions to receive the full new State Pension.

If you do not need the National Insurance credits (for example, if you are already working and paying National Insurance), you can transfer them to your partner if they are not working or are on a low income and not paying National Insurance contributions.

While it's crucial to report Child Benefit accurately, please don't worry! If there are any discrepancies, HMRC typically does not charge interest on overpaid tax credits. However, they do expect prompt repayment of any overpaid amounts.

Penalties are generally reserved for cases of negligence or failure to report changes in circumstances, so as long as we stay on top of things, there shouldn't be any major issues.

When you send me your Self-Assessment information, please let me know if you or your partner have claimed Child Benefit. This will help ensure that we report everything correctly to HMRC and avoid any unnecessary complications.

Thank you for reading! If you have any questions or need further clarification, please don't hesitate to reach out. I'm here to help. Raising children is hard enough without worrying about HMRC as well!