Child benefit help

[LuckyFlash]

I’m about to have a baby and have been hearing a lot recently about people being fined for not paying back a portion of their child benefit and just looking for some advice so I don’t fall foul of the rules.

I presume that each year is calculated on how much you actually earn during that tax year, so for example the year I’m on mat leave and just getting SMP I presume there will be no issues claiming as I’ll be well under the threshold (rather than it being based on your usual non mat leave salary)?

It gets trickier once I go back to work as I earn exactly £50k (DH earns a lot less). I know this is the limit so from what I understand I would be able to claim without paying anything back. However, I do sometimes get a Christmas bonus depending on how well the company has done that year (usually around £3/4K). This would obviously tip me over meaning I’d have to pay back 30-40% of the child benefit - is that right?

I’ve also read though that your salary is calculated AFTER salary sacrifice for pension... I pay a 2% salary sacrifice each month. So how would I work out whether the pension would offset any potential bonus back down to £50k?

Does HMRC work it out for you when you do a tax return or am I expected to work it out myself?

I realise this is a real first world problem to some so I don’t want to offend, just want to make sure I’m not doing the wrong thing. I’m happy to pay back what I owe, I just don’t want to be fined.

Any advice welcome!

Watching as I am a low earners, but DH earns over threshold (but with breaks in employment, so never exactly sure when or if we've hit the threshold!). We've been waiting for some kind of letter to come through.

Hmrc will work out your charge on your tax return when you fill that in. I would advise using the CHB calculator to check your ANI as well. If below 50k, no charge, between 50k and 60k a charge due and over 60k 100%due back. www.gov.uk/child-benefit-tax-calculator

Timeforabiscuit....don't wait for a letter, if you do that and there was a charge it'll go back to all in date years. Check the ani and call the tax office if above 50k for any year dating back to 2013.

Sounds like you have got the hang of this.

The safest bet is to continue to claim, but then register for self assessment. You then pay it back the year after.
You've spotted that the 50 to 60k is INCOME which is after pension deductions (and any other pre-tax salary deductions can help like childcare vouchers, cycle to work, increases pension deductions). I'd expect you to have more than 2% pension deductions actually so you might wat to increase them.

Look at your P60 for last year to see what your gross was, and any deductions to get your income. From that you can then budget for what will need to be paid back and save it!

The self assessment isn't that bad if you have simple salaried employment. And by claiming child benefit any non-earning parent gets NI contribution years

I think it's your taxable earnings as shown on P60. This figure should have pension contributions deducted already - I think. I'm no expert, but HMRC had my husband's earnings figures on his Self Assessment account.
And yes, to PP, don't wait for a letter if earnings over 50k. So many reports of people receiving big bills to repay CB plus penalties for not filing Self Assessment over several years.

Crap :( - thanks for the heads up, ah well not like I have anything else to distract during lockdown!

Don't forget it is about tax years either. So if your maternity leave straddles two tax years you will possibly earn less than £50 000 for both years.

Not personal experience but a friend got caught out.

The pension sometimes is deducted but depends on when it comes off. Bonuses do count. You have to do a tax return each year - not sure who calculates it but I know the penalties are harsh.

And do not wait for the letter - they’ve got into a complete mess over it as had to pay a huge sum and penalty immediately (they were advised in the future to save all child benefit for the year until you know how much to pay back).

If you look at your p60 that tells you how much taxable income you had for the year. You get that in April and then do your tax return for paying back a portion of it the following December (ish) to be paid by jan 31st.

It’s fairly straight forward.

Here's how we manage it with a variable income:

1. Don't spend the child benefit.

2. Have a private pension scheme as well as occupational pensions, and put savings by for a lump sum to add.

3. just before the tax year ends, look at what is needed to get DH under the threshold, and whether we can afford to do it.

Last year we were just about to put our lump sum in, when our IFA said it would be better in an emergency fund due to Covid. We had to pay half the CB back, but we were glad of the money when he was made redundant in July.