A MAJOR change to child benefit has been announced following a shake-up that will impact hundreds of thousands of parents.
You get child benefit if you’re responsible for bringing up a child who is under 16 or under 20 if they are in approved education or training
Changes to child benefit have been revealed[/caption]
The payment is used to help parents cover the costs of childcare.
It is paid at two weekly rates – £26.05 per week for your eldest or only child and £17.25 for any additional children.
But under the high income child benefit charge if you or your partner earn over £60,000 a year you have to start repaying some of the amount.
The more you earn the more you have to pay back. Once you start earning £80,000 you need to repay the full amount.
Before, the only way to pay back the cash boost was through filing a self assessment tax return.
This is a system HMRC uses to collect income tax.
However, it was announced during the Autumn Budget last year that the government would shake up how high earning parents could pay back the charge.
Under these new rules, which came into force yesterday, parents can now pay back what they are owed through PAYE.
This is the system your employer or pension provider uses to take Income Tax and National Insurance contributions before they pay your wages or pension.
Your tax code tells your employer how much to adjust.
As part of the change, parents can now opt out of filing a self-assessment return; instead, HMRC will adjust your tax code to tell your employer or pension provider how your tax will change.
Tens of thousands of people only file returns to pay HICBC. This group can now opt to use the new digital service.
But you will need to tell HMRC that you plan to stop Self Assessment before the filing deadline for the 2024-25 tax year, which is January 31 2026.
HMRC will be writing to more than 100,000 people who are newly liable for High Income Child Benefit Charge to invite them to use the new service.
Dan Tomlinson, Exchequer Secretary, said: “We’re modernising HMRC to make tax simpler.
“Tens of thousands of parents will no longer have to go through the extra effort of filing a tax return as this new simple and straightforward system takes the stress out of paying the High Income Child Benefit Charge (HICBIC).
How do I check my tax code?
You can check your tax code on your personal tax account online, on any payslips or on the HMRC app.
If you’ve got one, you can check it on a “Tax Code Notice” letter from HMRC too.
Bear in mind, that you might need your Government Gateway ID and password to hand to log in.
But if you don’t have this you can use your National Insurance number or postcode and two of the following:
- A valid UK passport
- A UK photocard driving licence issued by the DVLA (or DVA in Northern Ireland)
- A payslip from the last three months or a P60 from your employer for the last tax year
- Details of a tax credit claim if you have made one
- Details from a self-assessment tax return (in the last two years) if you made one
- Information held on your credit record if you have one (such as loans, credit cards or mortgages)
He added: “If they sign-up they will then be issued with a new tax code which will reflect their HICBC deduction.
“Any fluctuations in income and Child Benefit entitlement will be reflected in-year in their tax code.”
If you need to file a self-assessment return for any other reason other than paying back child benefit, you will need to continue to do so.
Eligible parents can register via the HMRC app or on GOV.UK.
What are the different tax codes?
Your tax code indicates how much you should be paying out to HMRC each month.
Below we have explained what the different codes mean:
- L – You’re entitled to the standard tax-free Personal Allowance
- M – Marriage Allowance: you’ve received a transfer of 10% of your partner’s personal allowance (£1,260)
- N – Marriage Allowance: you’ve transferred 10 per cent of your personal allowance to your partner
- S – Your income or pension is taxed using the rates in Scotland
- T – Your tax code includes other calculations to work out your personal allowance, for example, it’s been reduced because your estimated annual income is more than £100,000
- 0T – Your personal allowance (which is currently £12,570) has been used up, or you’ve started a new job and your employer doesn’t have the details they need to give you a tax code
- BR – All your income from this job or pension is taxed at the basic rate (usually used if you’ve got more than one job or pension)
- D0 – All your income from this job or pension is taxed at the higher rate (usually used if you’ve got more than one job or pension)
- D1 – All your income from this job or pension is taxed at the additional rate (usually used if you’ve got more than one job or pension)
- NT – You’re not paying any tax on this income
- Tax codes starting with K mean you have income that isn’t being taxed another way and it’s worth more than your tax-free allowance.
If HMRC does not receive information about your workplace or salary changes, then sometimes it will fail to change your tax code.
This means the perfect time to check is when you’ve moved.
If you reckon you’ve been landed with the wrong tax code, you should contact HMRC sooner rather than later.
The quickest way to do this is typically via the phone on 0300 200 3300.
If not, you could also send a letter to: Pay as You Earn and Self Assessment, HM Revenue and Customs, BX9 1AS, United Kingdom.
HMRC will change your code upon request and reimburse you for the money which has been overpaid over the last four tax years.
What help is available for parents?
CHILDCARE can be a costly business. Here is how you can get help.
- 30 hours free childcare – Parents of three and four-year-olds can apply for 30 hours free childcare a week.
To qualify you must usually work at least 16 hours a week at the national living or minimum wage and earn less than £100,000 a year. - Tax credits – For children under 20, some families can get help with childcare costs.
- Childcare vouchers – If your employer offers childcare vouchers you can get up to £55 a week in tax and national insurance savings.
You pay for your childcare before your tax contributions are taken out.
This scheme is open to new joiners until October 4, 2018, when it is planned that tax-free childcare will replace the vouchers. - Tax-free childcare – Available to working families and the self-employed, for every £8 you put in the government will add an extra £2.
