ListenToTaxman.com

UK PAYE Tax Calculator / Salary Calculator

The number 1 free UK salary calculator tax calculator since 1998. Calculate salary, national insurance, HMRC tax and net pay

How much will you lose from your Child Benefit because of the new High Income Charge?

Those working in the Child Benefit section of HMRC must be feeling the pressure at the moment as nearly 1 million letters are sent out to families affected by the new changes to Child Benefit.

The new High Income Child Benefit Charge will apply to families where either partner earns over £50,000. If either partner earns over £60,000 then a tax of 100% of the Child Benefit will be applied, basically negating the benefit. If earnings are from £50,000 to £60,000 then the tax will be applied on a graduating scale, with the tax getting closer to the 100% mark, the nearer the earnings are to the £60,000 mark. You can work out how much Child Benefit you will loose by using our new Child Benefit Loss Calculator.

In some cases deciding to stop child benefit payments altogether may be an option. The new tax will be collected through Self Assessment. In order to pay the High Income Child Benefit Charge one must be registered for Self Assessment. If you are earning over £60,000 and not obliged to register for Self Assessment you may decide to stop Child Benefit payments to avoid making a Self Assessment tax return.

If you are earning between £50,000 and £60,000 per year, and not obliged to make a Self Assessment return, then stopping your Child Benefit payment will cost you money, but save you making a Self Assessment return.

Stopping payments may appeal to some of those coming close to, and over the £60,000 mark.

If you do decide to stop Child Benefit payments you should be aware of a few points. Firstly, stopping payments does not affect your entitlement to Child Benefit. Secondly, you should register for Child Benefit for every child you have, regardless of whether you receive payments or not.

Stay at home parents registered for Child Benefit (whether receiving benefit or not) still get their National Insurance Credits. If you are a new parent and decide not to receive Child Benefit as your spouse is over the £60,000 limit, you still need to register, but tick the box on the form to say you do not want to receive payments. Otherwise you will have to buy back the National Insurance paying years you missed, while caring for your children, in order to qualify for your State Pension.

Entitlement to Child Benefit:

  1. can help you qualify for National Insurance credits that can protect your entitlement to State Pension
  2. can help protect your entitlement to other benefits such as Guardian's Allowance
  3. ensures your child is automatically issued with a National Insurance number before their 16th birthday

Tips on how to reduce the amount of Child Benefit you may lose.

You can find out more information on the changes to Child Benefit and how to stop payments on HMRC's page.

This article was published in our News section on 31/10/2012.

Some Guides you may be interested in

  • Off-payroll working in the private sector - a contractors guide IR35 is a tax legislation used to distinguish between employees and genuinely self-employed contractors. Last month we compiled a comprehensive guide to IR35. Now, we take an in-depth look at how the ‘off-payroll working’ rules, introduced to the public sector in 2017, will be extended to medium and large-sized businesses in the private sector from April 2020.
  • Valid expenses you could claim as a landlord Are you a landlord? Maybe considering a new home, and letting out your current property? Maybe you’re working abroad for a while, and renting your home to make ends meet? Before you take the plunge (or even if you took it years ago), this article aims to help you make the most from your rental income.
  • A guide to expenses for Contractors As a contractor, working through your own limited company, one of the main benefits available to you is the ability to claim business expenses. Claiming expenses correctly can reduce your tax bill, it’s a vital part of running your company tax efficiently.
  • 7 reasons you could have the wrong Tax Code Your Tax Code tells your employer how much tax to take off your pay. What if your code is wrong? In the past 4 years, 1 in 3 employed taxpayers have been overcharged tax because their employer has received the wrong code from HMRC!
  • IR35 - A contractors guide for 2018/19 IR35 is a complex piece of legislation used to distinguish between true self-employed contractors and employees. As a contractor, it’s important that you have an awareness and understanding of IR35 to ensure that you’re paying the correct amount of tax and National Insurance. Here’s a definitive introduction to IR35 to help you understand how it works.
  • Making Tax Digital for Landlords There's every chance that you are not yet aware of Making Tax Digital (MTD). However, if you are a landlord with rental income - (that's income, not profit) – greater than £10,000 annually then you should be. MTD is the biggest shake up to the UK tax system since the advent of Self-Assessment in the 1990s. And it affects you, from April 2020 at least.
  • Contractors - LTD Company v Umbrella? What are the benefits for contractors of setting up a Limited Company vs Umbrella Company? Read our guide, see how much you could take home in each setup.
  • Capital Gains Tax on Rental Property (Buy-to-let) 2018 Whether it's primary residence relief, letting relief, or even the costs of improvement works, our resident landlord and property tax editor, Iain King has the information you need to reduce your CGT liability.
  • 14 Reasons why you may be due a tax refund Almost 1 in 3 PAYE employees may have paid too much tax. We have put together a list of 14 reasons why you might be owed money by HMRC.
  • Avoid paying too much tax on rental income Our resident landlord tax expert, Iain Rankin, has put together a great guide on how to reduce the amount of tax paid on income from your rental property

More from our News section