Have you had to repay the Child Benefit?

child benefit

Have you been approached by HM Revenue & Customs (HMRC) asking for the repayment of Child Benefit? You may have received a letter from HMRC (The Child Benefit Office) saying that you’ve been overpaid, and they would like the money back.


There’s an appeal process in place if you feel that the facts in the letter are incorrect. You should examine the facts carefully.  Our advice is to review the letter in full and the reasons why HMRC are seeking the repayment.  If you don’t quite agree, call them and appeal in writing.  If you are not clear, then seek professional advice.We have outlined some facts here that may help you before you take any action.


Remember when it comes to claiming Child Benefit, you are meant to report any changes in your personal circumstances to HMRC as soon as it becomes relevant.  A full list of these changes can be found here .


Changes in circumstances could also mean that you need to pay the Child Benefit tax charge or what is commonly referred to as High Income Child Benefit Charge (HICBC). This means you are effectively repaying the Child Benefit you or your partner may have received in the past.


One of the problems is that the recipient and the person paying the tax charge may not be the same person. Normally the mother of the child receives the benefit, but the tax charge applies to the highest earner which could be the father.


What is the issue with the High Income Child Benefit Charge?


The HICBC was and remains a controversial piece of legislation since it was introduced some ten years ago. George Osborne the then Chancellor introduced the measure whereby support was only available to those who needed it.


If you remember these were similar times to what we are experiencing currently. We had just gone through the 2008 financial crisis and money was tight for everyone and public finances had to be controlled.  Austerity measures was all the government was thinking about.


The tax charge is basically designed to claw back the child benefit if you or your life partner earn over £50,000 per year.  These limits have not changed for a decade.  You are not entitled to any Child Benefit once one parent reaches income of £60,000.


The £50,000 threshold applies to adjusted net income which includes investment income and company benefits.  A few people get caught out here because their adjusted income can differ from the pay shown on their payslip.


The other issue with HICBC is that it is not based on household income. For example, if Mr Smith earnt £35,000 and Mrs Smith also had income of £45,000, they could keep all their child benefit.  This is because neither has breached the limit of £50,000.

However, if Mr. Patel earnt £80,000 each year and Mrs. Patel decided to take a career break after having their child they would have to repay or not claim the Child Benefit.


There is something unfair about this.  The HICBC is calculated based solely on the adjusted net income of the higher income partner in a couple regardless of who receives the benefit.  Often this leads to problems and couples forget to discuss repaying the benefit.  And before you know it there is letter from HMRC asking for the money back.


Of course, the other issue is income changes and sometimes quite dramatically and this could mean you fall into the arena of HICBC.  If you do, then you need to repay it before HMRC asks for it back.  It is always better to approach HMRC rather than being approached by them.


How do I repay the Child Benefit


The Child Benefit you have received is withdrawn at the rate of 1% for every £100 over the £50,000 threshold.  It is completely withdrawn at £60,000.


Some people decide at the outset when having a child not to claim the Child Benefit but the problem with this is it will have a consequence for the child in the future. They will not be automatically issued with a National Insurance (NI) number when they reach 16. They will need to apply to get the NI number.


An alternative would be to claim the benefit and opt not to receive payments to save on the hassle of repaying it back but only if one of you have reached the £60,000 threshold. If things change than you can request a payment in the future going back for up to previous two years.


If you need to repay the Child Benefit, then you do need to register for Self-Assessment  and it doesn’t matter if all your income is under PAYE.  The person who needs to complete the Tax Return is the higher earner in the relationship.


Our advice would be to register for Self-Assessment early and complete your tax return before the deadline leaving yourself plenty of time to budget for the liability .  Plus think if you want to opt not to receive any payments which will save you completing future Tax Returns.



What if I need help with my Self-Assessment


As you can see dealing with your own tax affairs can sometimes be confusing. There are updates in rules and regulations and unless you take a keen interest in the topic it is sometimes difficult to navigate the changes.


HMRC has run marketing and public campaigns on this very issue and many taxpayers have been caught out.  If HMRC launches a “discovery assessment” because you have not repaid the Child Benefit, then they will ask for the money back .  They could even impose penalties because you didn’t notify them.


So why struggle with these tax issues alone when you have experts at hand. Have a look at what we can offer  and take away the burden of the necessary taxes away from you.