Child Benefit High Income Charge + Tax Code

[tmint67]

Hi, Hoping someone could advise re a question I have relating to the Child Benefit High Income Charge and how this affects my tax coding. I have elected to continue to receive the CB and complete the SA before the end of December in order for the high income charge to be collected from my PAYE.
My query relates to how this is reflected on my tax code notice and more precisely how the charge affects my tax free personal allowance.

The HMRC seem to reflect two lines on my tax code notice which relate to the CB charge.

These appear as;

Personal Allowance: XXX

Less Child Benefit Charge: XXX
Less Underpayment Restriction: XXX

Total tax-free allowance: XXX

According to the notes -

the item "Less Child Benefit Charge" relates to Child Benefit Charge "This is a deduction to recover the child benefit you or your partner received as we expect your income to exceed £50,000 We will check this when we receive your tax return for the year to 5 April 2017"

the item "Less Underpayment Restriction" relates to Tax you owe us "We previously told you that you owe £xxx from an earlier tax year

The underpayment amount does relate to the CB charge from a previous year.

I would like to know whether this is correct as both amounts (Less Child Benefit Charge + Less Underpayment Restriction) reduce my tax free allowance considerably - hence, if this is the correct approach I am trying to decide whether it is worthwhile continuing to receive the benefit.

Not looking for advise as such - more that the coding notice is correct.

Would appreciate any feedback / experience you are able to share...

Kind Regards,
Tony

[Lambs]

T,

Impossible to say whether or not your Coding Notice is correct without more detailed information. In theory it could be, since it is possible within the PAYE regime to be paying off both a previous year's underpayment and current year expected underpayment. But this does not mean that Child Benefit is necessarily a bad idea, but rather that you've had it for a few years and now owe some back, for more than one year.

It seems to me that, so long as you are not paying back ALL of the Child Benefit to which you have been entitled, then you are getting to keep at least some of it - in which case, it would make sense to maintain your claim, but just set aside some of the money received so that you are prepared when it needs to be paid back through Income Tax/PAYE. If you want to check that the Child Benefit restriction is correct, then you can use our draft calculator at

http://taxationweb.azurewebsites.net/Pe ... debug=true

and it will tell you how much Child Benefit should be repayable, for any tax year in which Child Benefit has been subject to the clawback.

Kind regards,

Lambs

[section 44]

Not looking for advise as such - more that the coding notice is correct.

It might be. Its reasonable to assume that its correct based on the information you have provided.

I suppose it might depend on what you mean by a coding notice being "correct". PAYE only deals with deducting tax from earnings and making payments in lieu of your liability. It doesn't determine you tax liability - which would be done through self-assessment.

[tmint67]

Hi Lambs,

Appreciate you taking the time to provide the feedback...thank you.

I get that we made the decision to continue with the CB and as a result the claw back of the high income charge and that I need to allow for this either as a one-off repayment or via my tax code.

I suppose I am struggling to understand why my coding notice would be showing both a previous year + current year "expected" underpayment.

I get that I have previously received the benefit, declared that in my SA return and elected to make the repayment via my tax code. I would expect to see that on my coding notice.

I don't get why they are reducing my personal allowance further with an 'expected' amount - As I will be including this in my next SA return and therefore would be included in a later years tax code.

Essentially, I would expect to see 1 line in the tax coding notice each year relating to the clawback charge of the benefit actually received in a previous year.

Do you have any further thoughts on this - or do I need to seek one-to-one advice if I wish to understand it better?

Thanks once again....

Tony

[Lambs]

T, from memory, there is a box to tick on the tax return that says something like "please do/don't code out EXPECTED underpayments of Child Benefit" but I may be dreaming that up - cannot access personal tax software at the moment as am not in own office. I suggest speaking to HMRC and asking if they cannot wait for it to be addressed through SA as per previous year, and see what they say.

Kind regards,

Lambs

[bd6759]

The purpose of the tax code is to try to ensure that the correct amount is collected from your salary. In that respect it is entirely reasonable that the current HICB is shown in your code. The alternative would mean that the amount due is not fully collected until 24 months after the end of year in which is was due.

[robbob]

, from memory, there is a box to tick on the tax return that says something like "please do/don't code out EXPECTED underpayments of Child Benefit" but I may be dreaming that up

Lambs it totally correct here (Box 3 on page TR6) and if the box was not ticked its a simple case of ringing hmrc and asking that "any potential amounts coded out" be removed and hmrc will remove what they can, i don't know unfortunately if that route would remove some or all of the issues - all i know its much easier "not having potential" amounts included where possible - although one needs to be aware that not having a tax code adjustment ensures that there will be more to pay via self assessment than would have been the case if the code was lowered.