Basic rate taxpayers could face a high income tax burden – are you concerned? | Personal finance | Finance


Under current rules, if a person claiming Child Benefit or their partner earns more than £50,000 a year before tax, they are required to repay some or all of their Child Benefit in the form of HICBC. Family allowances can be requested by anyone responsible for a child under 16 or under 20 if they are in approved education or training. There is no limit to the number of children an application can be requested for.

As the base rate bracket covers taxable income from £12,571 to £50,270, this means that a small proportion of base rate taxpayers may be affected. If your income exceeds the threshold, HMRC will give you two options.

The first is that you can receive child benefit payments and pay any tax burden at the end of each tax year.

With this option, the partner who earns the most, even if both earn more than £50,000, is responsible for reimbursing the part of Child Benefit they are no longer entitled to.

To do this, they will need to complete a self-assessment tax return so that HMRC can calculate the amount of additional income tax to be paid.

HMRC defines ‘partner’ under this legislation as a person with whom a person is married, in a civil partnership or with whom they live as if they were.

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What would be reimbursed depends on the salary. This is because a person is required to repay 1% of their child benefit for every additional £100 they earn over £50,000 a year.

Those earning over £60,000 are required to repay their Child Benefit in full to the government.

The second option is to simply ‘opt out’ and not receive Child Benefit payments, which means you will not pay the tax burden.

If a person chooses the second option, they will still need to complete the application form if they hope to receive National Insurance credits, which count towards the state pension.


Individuals will also need to complete the form if they wish to ensure that their child automatically obtains their National Insurance Number before the age of 16.

Otherwise, they will have to apply for it themselves.

Couples can have a combined income of up to £100,000 and not be affected by the charge as long as neither of them has an individual income above £50,000.

This would mean that if a couple earned £45,000 each, with a combined income of £90,000, they would not be affected by the charge.

The group also believe that the point at which Child Benefit is fully clawed back should rise from £60,000 to £75,000.

The group said the policy “no longer meets its original intent to target only higher rate taxpayers”.

The LITRG has expressed its belief that the burden structure encourages tax payers not to apply for Child Benefit, which could “affect an applicant’s state pension record”.

This can happen because the claimant could “potentially miss national insurance credits”.

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