If you are claiming child benefit and your profits or salary increase, you may find you have a larger tax bill than expected.
Whilst you can still make a claim, but you have to pay back 1 per cent of the Child Benefit for every £100 if you earn between £50,000 and £60,000. Putting this another way, you are required to pay back 10 per cent for each £1,000 you earn over the threshold. This means that if you or your partner earn £57,000 a year, you have to pay back 70 per cent of what you get in Child Benefit as tax. If you earn £60,000 or more, you have to pay back the full amount through tax. For a family with 3 children this could be in excess of £2500 p.a.
You could increase the amount of Child Benefit you are entitled to even if you earn more than £50,000 by increasing your pension contribution. Doing this lowers your net-adjusted income, which is taken into account when the tax charge is calculated. Also Don’t forget to record payments to charity etc under Gift Aid as this also reduces the clawback.
You do need to notify HMRC if you do not already file a self- assessment tax return and this scenario applies to you.
Contact us to review the position and assist with registering you for self-assessment.
