Warning for 200,000 families set to lose thousands next year due to extra child benefit charge

0
15
PPYWBF young parents with daughter working from home using laptop

ROUGHLY 200,000 families are set to lose thousands of pounds next year due to extra child benefit charges.

You have to pay the High Income Child Benefit charge if you or your partner has an individual income over £50,000.

Around 200,000 extra families will have to pay child benefit charges from next year

But while the threshold has not changed since the rules were first introduced in 2013, wages have risen due to inflation.

That means hundreds of thousands of families will be dragged into paying back some of their child benefit.

Figures from the Institute for Fiscal Studies (IFS) suggest roughly 200,000 families will go over the £50,000 threshold in the 2023-24 tax year.

Tom Waters, senior research economist at the IFS, said: “We’re getting on for a decade since the government first made it so that higher income recipients of child benefit have to pay some or all of it back.

“But over that time the point at which repayment starts – £50,000 – has remained constant, even as prices and earnings have risen.

“That means that more and more people are dragged into repaying child benefit over time.”

It comes as families already contend with a higher cost of living.

The consumer price index (CPI) level of inflation hit 11.1% in October – its highest peak in over 40 years.

It means the price of everyday essentials including petrol and food has soared.

Plus, the Bank of England has increased its base rate several times – it’s now at 3%.

This has been passed onto consumers through increased mortgage rates, piling pressure on prospective home-buyers or those looking to re-mortgage.

What is the high income child benefit charge?

Child benefit is given to families bringing up a child under 16 or under 20 if they’re in “approved” education or training.

There’s no limit to how many children you can claim for.

The benefit is worth £21.80 a week for your eldest or only child, then £14.45 per child for any additional children.

However, if you or your partner individually earn over £50,000 you have to start paying back some of your child benefit.

If your income is between £50,000 and £60,000 the charge is 1% of your child benefit for every £100 between those two figures.

If your income goes over £60,000 all your child benefit is taken away.

This means couples can have a combined income of up to £100,000 without having their child benefit deducted.

The benefit amount can be passed on to family members who look after your children.

But that parent has to be claiming child benefit already.

If your income is over the threshold, you can choose to still get payments and pay any tax charges to HMRC at the end of each tax year.

Or, you can opt out of getting payments and not pay the tax charge.

Parents have to notify HMRC if they are liable for the charge and they must file a self-assessment tax return to pay it.

Charity Turn2Us suggests using the government’s child benefit tax calculator to see how you could be affected by the high income tax charge.