Child Benefit Charges Tax Return Guide
Getting a pay rise is a good thing that is to be celebrated but it could bring with it new problems especially if your income goes above 50,000.
If you have children and have been getting Child Benefit tax breaks, you may have to pay back some of the benefits. The good thing is that there are morally acceptable and legitimate ways to reduce tax liability.
Child Benefit if you are Earning More than 50,000
If you or your spouse are earning an income of 50,000 or more in a year before tax, then the HMRC will expect that you pay back a portion or in some instances all of the Child Benefit that has to be declared in the form of Extra Income Tax.
What Happens when you and your Spouse are Making Less than 50,000 Annually?
In the instance that you and your spouse each make less than 50,000 annually, you will be eligible for Child Benefit and will not have to remit or pay back anything to the HMRC.
What Happens when either you or your Spouse is Making between 50,000 and 60,000 Annually
If either you or your spouse is earning between 50,000 and 60,000 annually, you will be expected to declare and pay back part of the Child Benefit you got which will now be deemed extra Income Tax.
What Happens of either you or your spouse is making more than 60,000 per year
If one or both of you are making more than 60,000 a year, then you will need to pay back the Child Benefits as Income Tax.
What Happens When a Spouse Moves In
If you move in with a spouse that is earning more than 50,000, the tax situation will change. If you are earning more than 50,000 and your income is higher than that of your spouse, you will have to pay the tax charge. If their income is higher they will pay the tax charge.
How does it work?
One of the biggest benefits of claiming Child Benefits is the effect on your State Pension. This works if you are currently unemployed and happen to be at home looking after your child or children. Since you may not be making payments to National Insurance, the Child Benefits will be credited to your State Pension. You can always call 0300 200 3100 and talk to a Child Benefit Office representative if you need more information on how this works.
If you are being paid on a weekly basis the full amount of Child Benefits will still be paid to you every single month. However, this is only applicable if the amount of money you are making is below the 50,000 income mark.
However, things will typically change if either you or your spouse start making more income. For instance,
if either of you starts getting more than 50,000 a month, the HMRC will expect that you pay more Income Tax. The reasoning for this is that you will need to repay part of the Child Benefit that you are no longer eligible for.
The HM Revenue and Customs authority (HMRC) requires that you file a Self-Assessment tax return. This makes it possible for the HMRC to determine how much in extra Income Tax you should pay.