HMRC has recently released a survey looking at some of the reasons many taxpayers misinterpret the rules around the High Income Child Benefit Charge (HICBC), or completely ignore it ...
Even though HICBC has been in place for a number of years, there's so much non-compliance that HMRC needs to find out why. In most cases, rather than deliberate evasion, the main reason was a lack of awareness of these rules and not realising that a change in circumstances could mean they could now fall under the rules.
Many just assume HMRC knows how much they earn and how much child benefit they are entitled to!
The biggest concern here is the consequences for people who simply opt-out of claiming child benefit to avoid having to deal with HICBC. It seems like a sensible move, but child benefit claims also serve to maintain National Insurance contributions for state pension purposes.
This means you may find you can only claim a reduced state pension. Without getting involved with self-assessment, individuals must establish their child benefit claim, but ask for it not to be paid!
This really is a ticking time bomb and needs to be addressed by HMRC which must improve education and guidance to taxpayers rather than just waiting for a future pensions crisis to hit.
If you feel inspired to find out more about anything I've said here, do call me on 01908 774320 or leave a comment below and I'll be in touch as soon as I can.