Government to simplify collection of high income child benefit charge
The Government is planning to collect the charge via PAYE instead of self-assessment. How will this work, and what does it mean for you?
In a recent announcement it was confirmed that changes will be made to simplify the collection/payment of the high income child benefit charge (HICBC). Currently, those liable to pay the charge must register for self-assessment and pay the HICBC through their tax return each year. There have been many tribunal cases concerning the HICBC recently, largely due to the lack of awareness of the rules despite them being introduced a decade ago. Those that failed to complete tax returns have been stung with penalties for not completing a tax return in addition to their HICBC arrears.
It is hoped that by collecting the charge (tax) via PAYE, the administration will be reduced for both HMRC and the taxpayer. Removing the requirement to complete a tax return will surely be welcomed, especially since it has been acknowledged that those who only pay taxes via PAYE are unlikely to be aware of their obligations. It does of course accelerate the payment of tax to HMRC too.
However, collecting tax for additional items via a PAYE code has never been a perfect system, with adjustments sometimes needed after the end of the tax year. For instance, an individual could be earning over £50,000 and in theory be subject to the HICBC, but, if they make gift aid donations or personal pension contributions, they may fall below the threshold. Without the benefit of a self-assessment tax return, the onus will be placed on the taxpayer to check that the PAYE deduction is in fact correct, and to contact HMRC for an adjustment.
Related Topics
-
Deadline for child benefit tax
Changes to the high income child benefit charge mean some couples will pay less tax. Others can also benefit but must take steps to do so. What’s required and when?
-
Can dividends ever be paid from loss-making company?
Dividends are generally the most tax-efficient form of income you can take from your company but they can only be paid out of profits. Despite this, might there be a way for your loss-making company to pay you a dividend?
-
New guidance on commuting expenses for hybrid workers
You probably know that you can’t claim tax relief for the expenses associated with travelling to your usual place of work. However, what is the position if you're a “hybrid” worker? The guidance on this has recently been updated for clarity, so what's the answer?