- Child Benefit is a helping
hand from the UK government for many families. The tax-free payment is often used by parents to top up their income, but for some who are deemed high earners, HMRC will actually claw back that payment in the form of the high
income child benefit charge. If you're thinking of or
already claiming Child Benefit, understanding how this charge works and who is liable to pay it can help you plan ahead more effectively. In this video, we will cover a quick recap on the
basics of Child Benefit. How does the high income
benefit charge work? How is the charge applied? And finally, the non-monetary benefits of claiming Child Benefit. Now before we get into today's video, make sure to hit that subscribe button as well as the notification bell to make sure you're kept up-to-date with all of our latest content. This really helps us to
create more helpful videos and to get you free quality advice from real qualified accountants. (bright music) If you're responsible
for bringing up a child, then you are more than likely
eligible for Child Benefit, providing that the child you
look after is either under 16 or under 20 and in an approved
education or training. The Child Benefit payments
are made every four weeks, and if approved, you'll receive 21 pounds and five pence per week, or 1,094 pounds 60 per
year for your eldest child, and 13 pounds 95 per week, or 725 pounds 40 per year
for each additional child. Now there is no limit to
the amount of children you can claim for if you
meet the qualifying criteria, however, each child can
only be claimed for once. So if you have joint custody of a child and they split their time
between two households, then only one household will
be able to claim the benefit. So that's a very quick
look over the basics of Child Benefit, and if you'd like to know more, there's a link in the description
box to the gov.uk website where you can find out a
lot more about Child Benefit as well as more information on who is eligible and how to apply. (bright music) Now just before we continue
with today's video, we are thrilled to be
launching the Accounting and Tax Academy membership
site in April 2021. We'll be posting downloadable
resources, tax tutorials, and in-depth courses that
you won't find anywhere else, and the best part is it's
absolutely free to join. Our community have already saved over one million pounds in tax, and we're just getting started. Click on the link below to
register your interest today. (bright music) When the highest earning individual in a household responsible for
looking after a child broadly has a salary or taxable
income from all sources of more than 50,000 pounds, they will be subject to the
high income benefit charge. It's important to note that the high income Child Benefit charge is applied even if you are not the individual claiming Child Benefit. So if your partner claims Child Benefit and you earn over 50,000 pounds, you will be liable for the charge. Now if both and your partner
earn about 50,000 pounds, then you can make an election
on your self-assessment return as to which one of you pays the high income Child Benefit tax charge. The way this benefit charge works is for every 100 pounds you
earn over 50,000 pounds, HMRC will charge you 1% of the total Child Benefit you receive. So once your income reaches 60,000 pounds, your charge will effectively
cancel out your Child Benefit as it will be exactly the same. The charge will not increase any further once it reaches 100% of
your total Child Benefit. So let's look at this with an example. Let's say you earn a salary of
50,000 pounds from your job. You also receive some property income after allowable expenses of 5,000 pounds that has to be declared on your
self-assessment tax return. This would make your total
taxable income, 55,000 pounds. You have one child and your partner receives
a tax-free Child Benefit of 1,094 pound 60 per year. So since your income is 55,000 pounds, you have exceeded the
limit by 5,000 pounds. Now, as we mentioned earlier, for every 100 pounds you
make over 50,000 pounds, you're charged 1% of your
total Child Benefit amount. So in this case, 50% of
your Child Benefit amount would be charged. That means you, as the higher earner, will have to pay back 547
pounds 30 of Child Benefit. That's 50% of 1,094 pounds 60 through your self-assessment tax return via the high income
Child Benefit tax charge. (bright music) It is your responsibility to inform HMRC that you need to pay the
high income tax charge. Failure to do so will
usually lead to penalties. Now you let HMRC know about this through your self-assessment tax return, but you will have to fill in
all the relevant sections, including informing them of
all of your income sources. If you're looking for more information on self-assessment tax returns, you can check out our full
self-assessment playlist by following the link in
the description box below. (bright music) Now, if your income is over
60,000 pounds a year after year, you may have discounted Child Benefit as being something you
can take advantage of. However, outside of the
obvious monthly payments, there are a couple of extra features that Child Benefit brings, even if your income means
that you will effectively not receive any financial
gain from Child Benefit. Firstly, by claiming Child Benefit, your child will automatically get a National Insurance
number when they turn 16. Secondly, by claiming Child Benefit, you will get National Insurance credits. These count towards your state pension and you will receive these
until your youngest child is 12. Now because of this, spouses should consider which
one claims the Child Benefit. It usually makes more
sense for the lower earner to apply for the Child
Benefit as, remember, any high income tax charge must be paid regardless of which one is
claiming the Child Benefit. We have a full blog post about this topic which goes into even more
detail about the Child Benefit, the high income charge, as well as the forms needed to apply, and even how to stop
claiming Child Benefit. Follow the link in the description box to head to our site and read it today. I hope this video has
helped you understand how the high income Child
Benefit charge works and it's taken you one step
closer to knowing your numbers. If you found this video helpful or if there are any topics
you'd like to see us cover in the future, then let us
know in the comments below. Finally, make sure to like and subscribe as this really helps us to
get our content out there. This is Matthew Schouten for the Accounting and Tax Academy. Thanks for tuning in. (bright music)
