Do I need to be proactive about telling the tax man (HMRC) I earn more than the child benefit threshold?
This year my company was sold and I had some stock options so made a bit of cash from it (whahoo). My wife doesn't work and we have 2 kids and previously we were very slightly under the threshold at which you start having to pay back some of your child benefit. However, now we're unexpectedly quite a bit over it.
I just rang the child benefit people and they tell me that I should probably register for self assessment. I was quite tempted just to unregister for child benefit but apparently If I do that then my wife will stop getting the automatic national insurance stamp each year and will lose years of state pension..
So I'm in the unenviable position of now having to register for self assessment simply so that I can pay back money which we're going to get back in the form of child benefit. That means I need to start saving, specifically to pay things back etc..
Does anyone have any suggestions to avoid this farce? To be honest, the only reason I even knew about this is because I follow the news. I haven't had any information from HMRC that it might be a possibility. Does that mean there's thousands of people out there who are falling into this trap without even knowing and are suddenly going to be handed a large bill?
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unregister for child benefit but apparently If I do that then my wife will stop getting the automatic national insurance stamp each year and will lose years of state pension
You probably got this wrong according to Citizen's Advice.
You can choose not to receive any Child Benefit, if you don't want to pay the extra tax. However, HMRC is encouraging you to still fill out a Child Benefit claim form even if you choose not to actually receive any Child Benefit payments from them. This is because filling your claim form for Child Benefit can help you build up national insurance credits which can help protect your future state pension. This is particularly important if you've stopped work to look after children full time. It can also help protect your entitlement to other benefits such as Guardian's Allowance, and ensure your child is automatically issued with a National Insurance number before their 16th birthday.
Completing a Child Benefit claim form will make it easier for payments to start again if your circumstances change and your income falls below the £50,000 limit.
As for Self Assessment
If you decide to continue getting Child Benefit, you'll have to fill in a self-assessment tax return. This is when you'll have to declare you were getting Child Benefit and pay the extra tax, known as the High Income Child Benefit Charge.
You'll have to register for self-assessment if you are not already registered.
You can choose to pay the tax charge either:
as a lump sum through self-assessment or
through your tax code under pay as you earn (PAYE). However, even if you choose to pay the tax charge in instalments through PAYE, you'll still have to complete a self-assessment tax return.
The following is important though:-
It is your responsibility to pay the extra tax, even if you don't hear from HMRC.
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