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?

I got a promotion taking my salary above £50k in September. Stupid question but do I register for SA now or wait and see what my P60 looks like at the end of the tax year? I make quite high pension contributions (c£400/mth) so not totally sure how far above 50k I will end up (sometimes get small bits of overtime /bonuses)

Also interesting that the threshold hasnt shifted at all since they introduced it. £50k in 2013 would buy a lot more house than £50k in 2021.

I'm not complaining, I feel so lucky compared to where I was a few years ago (literally skipping meals to get buy after mortgage and childcare paid as a single mum). But I can see that people living nearer London are hardly living a life of luxury.

Just be aware, because you are a higher earner they may not offer you a repayment plan.

DH and I worked insane hours and lots of extra locum work to get the deposit together for our first house. We had just completed on it when it was in the news that many second jobs had been incorrectly taxed.

Thousands were affected, HMRC didn't allow payment plans for anyone who owed more than £1000, as they were deemed high earning enough to have savings.

We owed £4k and had to max out a credit card to pay it back! Our house purchase had wiped everything out.

Thanks, that’s useful to know in advance x

Agree with others regarding the pension, you might be able to reduce salary, save for future and keep the benifit in full.
I dont understand why it is not calculated on the household income, other benefits take into account the partners income.

OP as far as I know, there is a halt on HMRC being allowed to reclaim Child Benefit following a tribunal ruling in July this year (Google it). I know in our situation - we've been in dispute with HMRC about it since last Christmas - that "everything is on hold".

OP just checked and it's going to the Court of Appeal, plus there is a move to enact legislation to undermine the Tribunal decision. It may be that your situation is different / you want it resolving and / or may want to make provision for claw back anyway, but it's worth doing some reading (the decision involved the Wilkes family).

I received a significant work bonus one year which took my salary over the threshold for having a personal allowance. I owed £4k after I did my tax return. The HMRC were not nice to deal with. When I explained what happened the guy asked had it not occurred to me to keep some of my bonus back. Entirely my fault but I didn't know about the threshold and every penny was spent on a house deposit. I had to repay in 3 instalments or do a full income and expenditure assessment

Can't you make some backdated pension payments? Check how many years you can go back & pay lump sums in to your pension.

That won’t make any difference Nat6999 as it won’t actually change the figures for previous tax years.

@QforCucumber

If OP is In a standard auto enrollment scheme like Nest, these are taken from net pay and the tax relief claimed rather than at source so her P60 figures will be correct.

Surely if you pay your pension from net pay, then you reduce your P60 salary by your total contributions for that year? And that's the amount that they will use to calculate CB tax owed.

I got it and owed about 3k, bloody nightmare. I thought either DH had been accounting for it in his tax returns or it had already been taken off in PAYE. What annoyed me was when DH was the higher earner (only very slightly over the threshold), they wrote to him and told him he needed to do a tax return because I was claiming CB, but when I was a higher earner on PAYE they actually told me I could stop doing tax returns, so I never picked it up. If I had actually had to fill in tax return I'd have seen the CB bit and filled it in!

I doubt you owe as much as 6K from the figures you have given, you'd only be slightly into the higher earner bracket. But if it is that much, you should be able to pay in instalments. I thoguht anything over than 3k you can.

HMRC are dreadful to deal with. They keep writing to my 82 year old mum, whose pensions take her only slightly into any tax threshold and whose tax affairs should be uncomplicated, and saying things like she owes them £300 that she paid two years ago.

Good job she is with it and keeps records.

Ohh I'm sorry OP, hope you're not feeling too rough with covid too. Hope you can get an affordable repayment plan.

As some of you seem well versed in this: I wondered if you knew if self assessment is still required if you get your total down to under 50k by contributing to a SIPP?

@QuiltedHippo

Ohh I'm sorry OP, hope you're not feeling too rough with covid too. Hope you can get an affordable repayment plan.

As some of you seem well versed in this: I wondered if you knew if self assessment is still required if you get your total down to under 50k by contributing to a SIPP?

I think you would have to do one or otherwise HMRC would think you're over the 50k limit. The tax return will make sure your pension contributions are taken into account.

This is a long read but wondered if p.20 in particular would be relevant to OP’s case researchbriefings.files.parliament.uk/documents/CBP-8631/CBP-8631.pdf

Hope the OP gets this sorted out soon. I’m in a similar situation re earnings but think with my (public sector) pension contributions, I’m just below the threshold.

However, in terms of planning ahead for the next couple of years, can anyone tell me if all forms of ‘salary sacrifice’ are accepted as legitimate ways of reducing taxable salary for the purposes of this calculation?

Ie I suspect I’m allowed to reduce my gross earnings by buying additional holiday and at some point I may be better to spend money buying holiday, which would reduce my monthly income but at least I would have holiday to show for it.

Does anyone know if this is the case? If so, perhaps this is another option for the op?

@MintJulia

Family allowance was introduced to ensure that mothers were able to feed their children, when their husbands were paid in cash and went to the pub/bookies on the way home on a Friday night. It was there to stop children starving and living in rags.

My df was one of those 'fathers'. We were a family of 7 and we would have starved if it had been left to him.

Child benefit is the modern day equivalent. Maybe you need to walk a mile in someone else's shoes !

Yes but people like the OP getting it is absolutely ridiculous.

@ElftonWednesday if your Mum is on a low income and having problems with HMRC she could get help from the charity Tax Help for Older People. Not sure how much coverage they have nationally and this is not the best time of year to contact them but DH volunteers with them.

@Puggalo

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

This.

I'm completely puzzled.
Just pay the damn money back

I'm sure you've decided to do this already, but just in case not, please stop paying the child benefit into inaccessible accounts!

@blueshiningsea don’t panic.

As you rightly say, your pension contributions don’t count off of it if it’s an employer pension scheme.

Same thing happened to us at the start of the year. We hadn’t realised because it came in after our eldest was born and husband only began to earn over the cap when she was 3 or 4 so it crept up on us. It’s terrible really, they should let you know rather than letting it go on for several years and then landing you with a massive bill. We owed £4K.

You’re best off pleading your case very politely and asking to pay it back in instalments through your tax. We are paying it back that way through husbands tax and it’s not very much each month. We’ll be paying it back for about 100 years probably but there’s no interest and it doesn’t count as debt and isn’t on your credit record. It is what it is.

It’s a disgusting system and designed to trip people up. It’s also unfair because my husband earning £58k and me earning £30k, household income of £88k are hit by it but a couple earning £49k each, household income of £98k aren’t.

Oh, and cancel your child benefit. You don’t want it paid to you anymore, it’s only causing problems!

It’ll be okay.

Hello all, thanks for all the helpful advice (will ignore the unhelpful comments as to write down all out financial circumstances, outgoings and other factors that would be time consuming and boring for most - suffice to say, if I could pay it out of a huge savings account I would have!.).
Anyway, the upshot is that I’ve cancelled the child benefit as cannot face being stung again like this and likely that my salary will increase to the upper 50s going forward. I paid a lump sum for 19/20 tax year (which was fortunately only 500 quid as was earning less then), owe just under 3k for 20/21 tax year which will be taken out of my salary under a new tax code in 12 monthly repayments from April onwards so just about affordable, and then will do a tax return next year for the 21/22 tax year covering the c.b I received until I cancelled today, and then again will pay it back though tax code. To be fair, despite various calls to different HMRC departments today lasting over 3 hours, HMRC were very helpful and professional and vital really as my tax code had been changed unbeknown to me meaning that 1500 quid was going to be taken out of my bank account in Dec - not a great Christmas present - which I managed to stop. So the upshot is that whilst I still owe a hefty amount that I hadn’t planned for, my repayments will be over a 2 year period so not a disaster I was dreading. Can sleep a bit easier now, tho Christmas will be a small and cheap affair.

So glad you got it sorted.

Was just coming on to say they can change your tax code, then saw your update. We were in a not so similar situation. My partner earns around 38k but because he had an old company car and fuel card, his car tax and emissions tax has thrown him over the 50k. I am a low earner, so it’s really hit us hard, as we rely on that money and have no savings :(
We got around it by increasing his pension contributions and he’s gotten rid of his fuel card - it’s costing us at the moment, but not as much as losing the cb and he should get some tax relief next year where we claw a little back.
It’s a flipping awful system, particularly when like others have said - a dual income of 49k each can still claim!

"my tax code had been changed unbeknown to me meaning that 1500 quid was going to be taken out of my bank account in Dec - not a great Christmas present - which I managed to stop."

Bloody hell! Well done for sorting it 👍