Most families don’t know about the High Income Child Welfare Fee, which means they can be asked to repay large sums if they earn more than a certain amount each year.
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High-income parents declare Children’s rights can be hit by large tax bills in just a few weeks – and many people are completely unaware.
More than a million families are being warned they could have to pay a huge bill for claiming Child Benefit in the next financial year, which begins in April.
Financial experts say this little-known issue centers on what is known as High Income Child Benefit (HICBC)Introduced in January 2013.
This is a tax that applies to anyone earning over £50,000 receiving Child Benefit, or their spouse claiming it.
The Child Benefit is a benefit available to anyone raising a child under the age of 16 or under the age of 20 if they continue their education or training.
About 1.6 million families, or more than a fifth, will be affected by the tax in 2022/23.
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HM Revenue & Customs (HMRC) explains: “Whoever is required to pay the fee will need to pay an amount equivalent to some or all of the Child Benefit to which they or their partner is entitled.
“Incremental tax charges for taxpayers earning between £50,000 and £60,000.”
The amount families pay depends on their ‘adjusted net income’ and the amount of Child Benefit they are allowed.
Adjusted net income is simply income minus any tax breaks, pension payments, and business losses if you are self-employed.
For every £100 someone claiming Child Benefit earns over £50,099 a year, they must repay 1% of what they received under the benefit.
If they earn more than £60,000, all Child Benefit must be refunded.
For example, someone earning £50,100 a year, just above the threshold, would be eligible for £1,099.80 in Child Benefit and would have to pay back £10.
Someone in a similar position earning £51,000 would return £109, and someone earning £60,000 would refund £1,099 in full.
HMRC has a Child Benefit Calculator Calculate the amount to be refunded.
Recent research by NFU Mutual found that most people are unaware they may have to repay their Child Benefit, with 84% of respondents unaware of the existence of a high Income Child Benefit Fee.
Sean McCann, Chartered Financial Planner at NFU Mutual, said: “Many families don’t realize they have to repay some or all of their Child Benefit when the top earner’s income exceeds that of the top earner. £50,000 It wasn’t until they received a letter from HMRC that they became aware.
“It could mean that some people end up paying thousands of pounds in tax bills, and more families are caught by this tax each year as wages rise.”
The Mirror reported that a father took the tax office to court on the matter – and won the case.
HMRC says tax information is included in packages provided to new parents about how to claim Child Benefit.
It said: “HMRC ran an outside marketing campaign when HICBC (High Income Child Welfare Charge) was introduced and wrote to approximately 800,000 taxpayers letting them know they could ads are also posted on the HMRC website for more details about HICBC.”
https://www.mirror.co.uk/money/child-benefit-warning-16million-working-26260400 Warning on Child Rights as 1.6 million working families demand to return thousands to HMRC