Feeling stupid and sick - Child Benefit Charge

[blueshiningsea]

By way of background, spent 10 years in a low paid job in the public sector. 3 years ago I bagged a dream job with a salary just under 50k p/a. Salary has increased year on year. I was reading a magazine last week and it talked about Child Benefit Charge for those earning 50k plus - where you had to pay back the Child Benefit up a sliding scale up to 60k pa where you don't get any. My DH earns less than me, under 40k. Unfortunately my DH has been putting our Child Benefit into our 4 children's' bank accounts for saving for Uni and they are the type of accounts that you can't get money out of again. I rang HMRC immediately and on their advice I did a self assessment today for the 3 years where we have been mistakenly receiving full child benefit and we owe £6k!!!! I feel sick and very very stupid that I missed this (no excuse I know), I think it was because it came into force when I was earning a lot less and so didn't register as being applicable to me. Our savings are less than 6k as we have just had some work done on the house, and we've committed to some expenses next year (holiday and school trips) but very worried about money and (although not catastrophic) won't be able to buy much for the kids for Christmas now. Think HMRC do some sort of repayment scheme, but with interest? Would this be the best way to sort this? Just wondering does anyone have any wisdom or practical words of advice?

Is the 50k / 60k cap joint or per person? I thought it was per person? But haven't checked...

Yes it’s per person, so that’s me...

So you're over 50k, not under? It's not clear from your post what your salary has been the last 3 years.

Don't forget that pension payments come off your salary before they calculate the £50k for child benefit purposes.

Sorry, I’ve got covid too at the moment so not a good week! I started on a salary of 50k in year 1 and then have done up each year by 2k.

You get to take pension contributions and charitable donations off. I earn a little more than 50k but my pension contributions take me under 50k.

It must be a fairly common mistake, I'd assume? People don't always reassess what they claim when their salary increases, especially when it's technically not means-tested like CB (anyone can claim it regardless of income, but obviously there are then repayments required if over the threshold).

Sorry it must be a shock. I don't have any experience but I would have thought there'd be a repayment scheme of some kind.

By the way anyone reading this who earns over the threshold, please don't think 'I won't bother claiming' - you can technically 'claim' but not actually receive the payment (if it's not worth you getting it then paying it back) as it helps keep up your NI contributions.

I pay into an employer pension scheme and not a personal pension scheme and therefore the self assessment form didn’t ask me for that information which I understood to be irrelevant? Tbh form was as clear as mud tho

The very nice lady at HMRC recommended that we continue to receive the Child Benefit and put it aside as because my salary isn’t over 60k I shouldn’t get the full deduction

As others have said - double check you’re accounting for pension contributions if you’re on salary sacrifice as it’s based on taxable income, not necessarily gross income.

I.e then repay the amount I owe at end of next tax year for the NI reason

Are you not making any pension contributions? If you are, it's 60k - your pension contributions so that might reduce it a bit

Yes I pay into my employers pension scheme, the HMRC lady said that most employers deduct pension contributions from gross pay and I should find out if my employer is part of the net pay scheme - will ask, but have no idea what this means?

Feeling dreadful with covid and sorry so off to bed now but any wisdom gratefully received - this is all a bit over my brain capacity 😳 x

You need to use the figure that appears on your 60 as taxable income (ie after your pension contributions have been deducted) and when you submit self assessment forms, you can deduct any charitable giving, professional fees and an allowance for tax years where you needed to work from home at any point due to Covid

Your p60, I mean

Your numbers don’t make sense to me 🧐
Annual CB for 4 children is about £3300.
You’ve only been over £50K for 2 years, you said. New job 3 years ago, first year just under £50K (so fine) then £52K and £54K.
So even if you weren’t entitled to ANYTHING in those 2 years that wouldn’t be much more than £6K - but you were entitled to some of it.

Others have mentioned pension contributions… what is your net salary after pension and before tax? If your pension is a salary sacrifice and the £50K is after that, it won’t make a difference, but you could be missing an important deduction for CB charge here.

I’ve stopped claiming child care vouchers now - so I don’t know the detail of the changes. But I was still on them just a few years ago and they also were deducted from my salary for CB calculations.

The first thing is to check your salary net of your pension contributions though!

Thanks - yes, I used the total income and total tax figures from my P60s on my self assessment form so guessing the tax liability must be correct :(

I am having similar. I earn £55k before pension contributions but HMRC have been so hard to navigate. I have registered for self assessment 3 times now but no code come through yet. Argh!

Sorry I should have mentioned that I receive a company bonus each year (which I am vet grateful for) which inflates the annual salary by a couple of grand, which is why the tax liability is higher. And HMRC seem to have estimated what we will owe in 2021/22 tax year based on my 2020/21 salary and have added that onto the amount owed.

Thanks Coco, will check figures again in morning, feeling covid delirious now :(

Johnny - I had an old self assessment account from when I rented a flat about 20 years ago, so think it was quicker for HMRC to reopen that account than create a new one - sorry it’s proving tricky for you

I was on phone for 1hr 10 mins trying to get through to HMRC so need to have all the info at my fingertips when I need try ringing

Get some rest! You won't be able to solve this tonight - it can wait. And perhaps more people can post helpful replies for you to read tomorrow

You're on nearly 100k between you and you're fretting over 6k that can be paid back intermittently?