Parents are being urged to check their child benefit or they could face a fine and extra tax charges.
For families where a mum or dad earns over £50,000 the High Income Child Benefit Charge (HCIB) kicks in meaning you’ll be taxed on the money you claim.
On top of this, from today late tax returns will incur a £100 fine with lengthy delays also adding interest later on.
Here’s everything you need to know about the child benefit tax - how to pay it, who has to pay and how much the fine is if you fail to file the tax return.
How do you pay a child benefit tax?
Families where a mum or dad is earning over £50,000 must tell HM Revenue and Customs (HMRC) about the child benefit they get and pay a tax charge on it.
To do this you need to file a tax return and the extended deadline is midnight 28 February.
The usual deadline for self-assessment is 31 January but the tax man has given extra time to file with no penalty.
Around 1.5 million tax returns are still outstanding, HMRC said, although not all of these are parents as you have to complete if you’re self-employed too.
To file a tax return for 2020/21 go to gov.uk if you have registered before, or register for self-assessment online if you haven’t.
If you’re registering for the first time then you may not be set up in time to file by the extended deadline - you usually have to register by the October before.
Who has to pay the tax?
If either parent earns over £50,000 then they have to pay a tax charge on the benefit.
The tax charge is paid at a rate of 1% of the benefit for every £100 earned over this amount.
If either parent earns £60,000 or more the full amount must be repaid.
Someone earning £55,000 and claiming for one child would have received £1,115.65 in the previous tax year, but would have to pay £557 to cover the HICBC - according to HMRC’s child benefit calculator.
How much is child benefit and what is it?
Child benefit is worth £84.60 a month for the first child - or just over £1,000 a year - and £56 a month for an extra child.
You get Child Benefit if you’re responsible for bringing up a child who is:
- under 16
- under 20 if they stay in approved education or training
Only one person can get Child Benefit for a child.
It’s paid every 4 weeks and there’s no limit to how many children you can claim for.
How much could you be charged if you fail to file the tax return?
If you fail to file a self-assessment tax return you could be fined up to 30% of what you owe by HMRC.
A late filing penalty of £100 also applies and if it’s more than three months late interest
If it’s longer than that interest starts to be charged on outstanding balances.
If you fail to let HMRC know and don’t pay the tax charge, they can fine you - on top of what you owe.
Can you avoid the tax charge?
The value of the fine can be up to 30% of the amount, unless you have a "reasonable excuse".
A reasonable excuse is not outlined by HMRC or defined by the law but you must have a good reason for not meeting your tax obligation and you’ll need to prove this.
Many parents are not aware of the charge which came in from 2013 - The Sun previously spoke to parents who were hit with surprise bills of thousands of pounds.
More than 1,000 penalties were handed out in the 2019/20 tax year and nearly 5,000 the year before that.
If you are fined and think you shouldn’t have been you can appeal.
There is guidance on the Gov website if you need help with the Self Assessment and filing your tax return.
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