Child Benefit: A reminder in relation to changes you may have previously made … and which you may now wish to review.
Child benefit was previously repaid (via a Tax Return) if one member of the household earned over £50,000 in a tax year. The amount received was repayable in full once they reached £60,000 of income. Repayment was 1% for every £100 of their income above £50,000.
This has led to many now needing to complete a Self Assessment Tax Return, and some being caught by penalties and interest on the amounts owed.
It’s been viewed in the profession as a drastically unfair piece of tax legislation, as a household with two parents earning £50,000 would not repay child benefit, whereas a household with one parent earning £60,000, and the other nothing, would repay the benefit in full.
One of the main results of the legislation in recent years has been for many to not claim child benefit to avoid these pitfalls.
However, due to changes made in the last Budget, the income levels at which payments begin to be repaid have been increased, as has the upper limit, at which point the benefit is repayable in full from 6 April 2024.
Consideration must also be taken into any NIC credit for state benefits for the parent not working/gaining credit via other means.
The requirement to repay the benefit now begins once the highest earner in the household has £60,000 of income, and the amount is fully repayable when the highest earner receives £80,000 income. The rate of repayment is now 1% for every £200 of income above £60,000.
As such, unless the highest earner has £80,000 of income annually, they should reconsider claiming child benefit. The benefit can only be backdated for 3 months, so should be done as soon as possible. Link below:
High Income Child Benefit Charge: Restart your Child Benefit payments – GOV.UK (www.gov.uk)
Child benefit rates for 2024/25 are £25.60 per week for the eldest child, and £16.95 per week for any further children, with an increase annually of £83.20 per year for a family’s first child and £54.60 for any additional children. Total annual income for the first child is £1,331 and £881 for any additional children.
Going forward the plan is to move the repayment conditions onto a full household basis as opposed to simply the higher earning individual to create a fairer system, but how HMRC intend to do this has not yet been publicised, as it would appear difficult to implement.
If you would like to discuss further please contact:
Ben Bramwell
ben.bramwell@waltonsba.co.uk
Tel: 01429 234414
Please note: Our blog articles could be subject to change following the new Chancellor’s upcoming Budget announcements.
