Child benefit warning: Self assessment tax returns are due this month – how to cut costs | Personal Finance | Finance
Child benefit payments will provide eligible claimants with £21.05 per week for an eldest or only child and £13.95 for any additional children. There are no real restrictions on who can claim child benefit but those earning over £50,000 per year will need to pay back some of their payments to the Government.
Those earning between £50,000 and £60,000 will need to pay back one percent of their family’s child benefit for every extra £100 earned above £10,000.
For those earning more than £60,000, the child benefit payments will need to be paid back in their entirety.
These payments must be made through a self assessment tax return and the deadline for this falls on January 31 2021.
Fortunately, Kay Ingram, the Director of Public Policy at national financial planning group LEBC, provided guidance on how this tax can be covered effectively or even reduced.
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“Charitable donations made with gift aid increase the value of the gift for the charity, but also give higher rate taxpayers additional relief by reducing the income which is taxable.
“Gifts made last year can be deducted from income for the tax year 2019-20.
“Charitable gifts made in the current year can be claimed in the previous one too, which could be beneficial if income has fallen this year.”
Kay went on to examine pension options: “Pension savings made by the individual also reduce taxable income and may restore eligibility for Child Benefit.
Pension savings made by the self-employed and by employees into their own private pensions receive 20 percent tax relief at source – yet those with income over £50,000 (£43,430 in Scotland) are entitled to an additional 20 percent (21 percent if resident in Scotland). This additional relief can be claimed when completing a tax return.
“For members of workplace pensions, it is worth checking with the scheme whether all relief available has been given via payroll, and if not, claiming the balance through a tax return.
“Claims for tax relief may be backdated for four tax years.”
Already Paid High Income Child Benefit Tax or Waived the Benefit?
Some claimants may have been able to cover this tax bill by having it collected through PAYE.
To do this, people would have needed to inform HMRC by October 5 2020 and Kay laid out the options available to people in these circumstances: “Parents who have already paid the tax through PAYE adjustment, or who have waived payment of Child Benefit, may wish to reverse their decision if their income has fallen this year.
“With only three months until the end of this tax year, if income looks likely to fall below £60,000, it may be worthwhile claiming the Benefit now as payment of the Benefit can only be backdated for three months.
“Saving the excess income over the £50,100 threshold into a pension plan before 5th April would enable the Benefit to be claimed tax-free once more as well as yielding tax relief at 40 percent (41 percent Scotland).
“Parents who find it difficult to save for retirement while bringing up a family, need to consider how pension savings could increase their eligibility for tax-free Child Benefit”.
Impartial guidance on child benefit can be sought from the likes of Citizens Advice or the Money Advice Service.