High Income Child Benefit Tax Charge can be as tedious to manage as it is to say out loud, but it doesn’t have to be. Keep reading to find out how to make Child benefit work for you without the hassle.
How the High Income Child Benefit Tax Charge Works
HMRC introduced the High Income Child Benefit Tax Charge back in 2013, with the aim of recuperating money given to support the children of high earners.
The charge works on a sliding scale: for every £100 you or your partner earns above £50,000, you must pay back 1% of your Child Benefit payment. Thus, if you earn £60,000 or more, you will pay back the whole benefit.
Paying back the money can be tiresome because, like taxes for the self-employed, it involves filing a Self Assessment form. Many people with high incomes understandably find the process of receiving money just to pay it back quite tedious.
As a result, if you’re liable for the High Income Child Benefit Tax Charge, you might find yourself wondering: can I just opt out?
Yes, you can. But you probably shouldn’t. Here’s why.
The Perks of Child Benefit
The money isn’t all you get from receiving Child Benefit, you also get credit towards National Insurance and State Pension. If you opt out entirely, you lose these.
More importantly, if you’re a high earner but your partner isn’t, they lose out on these.
For example, if your partner stays home to care for children, they could benefit greatly from the NI and State Pension credits. They may not otherwise be able to accrue the credit for the future.
Getting the Best of Both Worlds
The key thing to remember is that the High Income Child Benefit Tax Charge claims back the money, not the extra perks.
This means that if you claim Child Benefit but don’t receive payments, you can still get the extras.
Knowing this one piece of information can make managing your taxes just that little bit easier.
As a result, you or your partner can receive the credits to their National Insurance and State Pension records but because you aren’t receiving any money, you don’t have to pay anything back.
In other words, you can keep all the extras you want and say goodbye to the hassle you don’t. All the benefits, much less effort.
If you don’t want to opt out at all, you can give authorisation to an accountant to manage your High Income Child Benefit Tax Charge for you.
Interested in making your tax returns simpler? Contact us today at 01772 788200 to see how we can help streamline your finances.
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