High Income Child Benefit Charge May Cost You Your State Pension
Have you opted-out of claiming?
Posted by Roger Eddowes on 14/07/2022 @ 8:00AM
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 ...
The High Income Child Benefit Charge is designed to claw back child benefit!
HICBC is designed to claw back child benefit received if a claimant or partner has income greater than £50,000 in any tax year. Couples do not have to be married or civil partners for this legislation to apply.
"Taxpayers with fluctuating or complicated incomes find compliance quite difficult!"
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.
Until next time ...
ROGER EDDOWES Business Godparent
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more about the High Income Child Benefit Charge, it may be a great idea to give me a call on 01908 774320 and let's see how I can help.
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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