Parental Benefit
Child benefit changes mean many more should now claim, says Paul Lewis.
Nearly half a million parents with high incomes got a £600- million-a-year tax cut from April. The people helped have dependent children and they or their partner have an income between £50,000 and £80,000 a year. But many will need to claim to get more money.
For the first time since child benefit was means-tested in 2013, the threshold where the test begins has been raised. It goes up from £50,000 a year to £60,000. And the upper limit where all the child benefit is taken back has gone up from £60,000 to £80,000. Anyone who gets child benefit and an income between those limits will gain. People who have not claimed before should do so now, but make sure the claim is not backdated before 6 April or a tax charge for an earlier year may be due.
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Parents with a dependent child can claim child benefit whatever their income. But if they or their partner have an income above £60,000 then the partner with the higher income pays an extra tax called High Income Child Benefit Charge (HICBC). It takes away 0.5% of the child benefit for each whole £200 above that amount (so the threshold is actually £60,200), and as income reaches £80,000 the charge is 100% of the child benefit, in effect taxing it all away. The means test operates on the higher earner. If two partners have an income of £60,000 each there is now no HICBC to pay, but if one earns above £60,200 then tax is due.
The higher-paid partner must fill in a self-assessment form to pay the HICBC. That has put many off claiming child benefit. But anyone with an income between £50,000 and £80,000 will now be better off if they do. The income that counts is called adjusted net income, which is taxable income after salary sacrifice and less pension contributions and Gift Aid donations.
Child benefit is £1,331.20 a year tax-free for the first child, £881.40 for each additional child. The parent who claims it gets National Insurance credits for each week any child is under 12. So even if it is all taxed away, it is worth claiming. For more information, search gov.uk for “child benefit tax calculator”.