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Higher earners urged to register for self assessment to avoid Child Benefit penalty

 

Parents on higher incomes are being reminded to register for self assessment by 5 October if they wish to continue receiving Child Benefit.

 

Earlier this year, HMRC introduced a new High Income Child Benefit Charge (HICBC) in a bid to claw back the benefit from individuals with incomes in excess of £50,000.

 

Under the changes, where a person in receipt of Child Benefit or his or her partner has adjusted net income of between £50,000 and £60,000, the HICBC is levied at 1% of the benefit for every £100 by which income exceeds £50,000.

 

Once adjusted net income reaches £60,000 the charge is equal to the full amount of Child Benefit received for the tax year. Where it is certain that the charge will bite, claimants can elect not to receive their Child Benefit

 

More than 390,000 parents with higher incomes have already opted out of receiving Child Benefit following the introduction of the HICBC. Those who did so before 7 January 2013 do not need to take any further action.

 

However, parents on higher incomes who continued to receive Child Benefit in 2012/13 will need to register for self assessment by 5 October 2013 (unless they have already done so) and complete a tax return. Individuals who fail to register with HMRC may incur a penalty.

 

HMRC is now writing to around two million higher rate taxpayers who it believes are affected by the new rules.

 

Commenting, Lin Homer, chief executive of HMRC, said: ‘HMRC is committed to helping people pay the right amount of tax. If you have had certain changes to your income in the last year, including those affected by the changes to Child Benefit, you have until October 5 to register for self assessment.’

 

For more information on the changes to child benefit, and for advice tailored to you and your family, please do not hesitate to contact us.