Understanding Child Benefit
Posted on 1st April 2022 at 09:20
In 2013, child benefit went from being a universal credit, which means that everyone who lives in the UK could register for the payments, to being a means tested benefit. However, the rules and the implementation of them have meant that HMRC have come under fire and have even been taken to court. Here at Office Minder, we want to explore the impact of the ruling and try help you to understand your position in relation to claiming child benefit.
Child benefit is paid every 4 weeks to one parent. You can check the government's website for the most up to date rates. The payment is higher for the first child and there is a second rate for additional children. If you or your partner's individual income is over £50,000, you will have to pay back some or all of your child benefit. It is important to note that by claiming child benefit you may get national insurance credits, which will count towards your state pension. This is particularly interesting if one parent is not in paid work for any period of time. If a parent earns less than £184 per week or indeed is not working, then they will not be making national insurance (NI) contributions. Claiming child benefit gives you the chance to the earn NI credits that you would not have otherwise. According to HM Revenue and Customs figures, more than 200,000 parents are at risk of missing out on state pension benefits, because the working parent is claiming child benefit, rather than the one who is staying at home.
Jason Wilkes took HMRC to court and won, based on the fact that he was unaware of the charge for higher income earners. This led to a costly campaign by HMRC who partnered with parenting brands to publicise how child benefit works. This article published in 2020 on Emma's Diary website is just one example. HMRC has since issued refunds to just under 5,000 families, which are worth £1.8 million for penalties that were sent to them for failing to report that they have received child benefit.
Many have called for the system to be simplified and while the public can understand why benefits need to be means tested, there is a cloud above this one which will always feel unfair. If two people in one household earn £49,000 individually, they will get the full child benefit but if a sole earner brings home £52,000, they will be required to pay some of that back. We recommend using the child benefit tax calculator to understand your tax charges. We also found Money Saving Expert's advice around potentially avoiding the charge (if your income is just over £50,000, for example), extremely clear and well laid out.
We hope that you found this article useful. Office Minder provides a full range of accountancy services including self assessment returns, end of year accounts, VAT calculations and filing, bookkeeping, payroll and CIS returns. By outsourcing these vital roles, you can spend more time concentrating on your business. Please contact us to discuss your requirements.
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