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Child benefit claimants who are on a high income may have to pay back a certain percentage of their payments as income tax to the government. If a claimant’s income is over £50,000, they’ll be required to pay back one percent of the child benefit for every extra £100 they earn over the £50,000 threshold.
For those with earnings over £60,000 a year, the entirety of their claimed child benefit payments will need to be repaid as income tax.
The calculations for these tax bills can get complicated but fortunately, the government provide a free-to-use tool on their website that can guide affected claimants.
This tax calculator can help claimants get an estimate of:
- How much child benefit they’ll receive in a tax year
- The high income child benefit tax charge they or their partner may have to pay
The tool in question requires various information from the user.
To start with, the tool will ask how many children the user wants to claim for, which specific tax year is being claimed for and/or if the user is claiming for only part of a tax year.
Beyond this, the user will need to enter income details for the current tax year.
This is where the information entered will need to be more complicated in nature.
The tool warns that the user should not combine household income but they should use their partner’s income if it’s higher than their own.
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The income needed is as follows:
- Salary before tax (with pension contributions including under net pay arrangements deducted)
- Other employment income – for example bonuses
- Taxable benefits provided by an employer – for example, the value of any medical insurance or company car
- Income from pension(s) before tax – for example from a state pension
- Other income before tax – for example, taxable profits from self-employment, taxable savings, dividends
- Income from property before tax – for example, taxable rental income
Once this information is entered, a user will also be able to enter details of any allowable deductions they may have, such as pension contributions deducted from pay.
Entering these deductions will be optional but it is the final element of the calculation.
The final screen will detail how much child benefit the user would have received and what tax charge (if there is one) will be levied on these payments.
If a charge is due, it must be paid through a self-assessment tax return.
This tax return will need to be registered for and this should be done by October 5 2021.
There are also deadlines for sending the tax return and paying the tax due.
If couples are working this all out together, it should be remembered that whoever has the highest income will need to pay the charge.
If these tax charges become problematic claimants can stop getting child benefit entirely at any time.
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