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Where Taxpayers and Advisers Meet

Tax anomaly and HICBC

Posts: 7
Joined: Tue Mar 03, 2015 6:23 pm

Tax anomaly and HICBC

Postby JCook » Sun Mar 24, 2019 8:10 pm

I have just been informed by my employer, due to an anomaly this year I will be paid 14 times instead of 13(lunar pay). I was paid on 6/4/18 and I will be paid on 5/4/19 for the 14th time in the tax year.

How will HMRC View this additional payment as it will put me way over the £50k threshold for the HICBC. Even though my annual salary is below the threshold?

Posts: 61
Joined: Thu Dec 22, 2016 10:04 pm

Re: Tax anomaly and HICBC

Postby D&C » Sun Mar 24, 2019 9:41 pm

Your salary is completely irrelevant as far as the High Income Child Benefit Charge is concerned.

You need to read up on "adjusted net income".

But the 14th payment is just additional pay in 2018:19 so if this you over the limit for HICBC then you will be liable

You should also be aware that to avoid complaints from staff your employer will tax you as normal on this 14th payment i.e. the same tax code as used on the previous payment will be used.

This mean you will also owe tax by virtue of receiving an extra 4 weeks of your tax code allowances. If you are on the standard emergency tax code of 1185L then you will probably owe c£365 because of this.
NB. Your employer is not doing anything wrong using the same tax code, it is done like this to avoid you getting an unexpectedly low take home pay on what is essentially just another "normal" pay day

To get ahead of the game you might want to consider registering for Self Assessment sooner rather than later. That was you can complete your return before 31 December 2019 and that way you can pay off what you owe through your 2020:21 tax code. Effectively an interest free loan from HMRC.

Posts: 7
Joined: Tue Mar 03, 2015 6:23 pm

Re: Tax anomaly and HICBC

Postby JCook » Mon Mar 25, 2019 10:07 am

I thought that would be the case regarding the HICBC, not taken into account the additional income tax that will be due though.

Thanks for the info.

Posts: 7
Joined: Tue Mar 03, 2015 6:23 pm

Re: Tax anomaly and HICBC

Postby JCook » Tue Jun 25, 2019 7:39 pm

Well I did my tax return this week and sure enough, I owe £2650 in a combination of HICBC and underpaid tax.

The question I have, is it better to pay this through my tax code or from my own pocket.

If I pay it through my tax code is it taken as part of my tax or after I've been taxed?

If I pay it from my own pocket I'm using money that has already been taxed.

Hopefully that makes sense.

Posts: 33
Joined: Wed Jun 19, 2019 5:04 pm
Location: Manchester

Re: Tax anomaly and HICBC

Postby hendersontax » Tue Jul 02, 2019 10:50 am

It doesn't make any difference to the amount you pay overall - if it's collected via PAYE then it increases the deduction from your salary but doesn't change the amount on which your PAYE tax and NIC is calculated. However, as previously pointed out there is a cash-flow benefit to delaying the collection of the amount to the following tax year, and also being able to spread it out over the course of the year. Hope that makes sense.
Tom Henderson ATT(Fellow) CTA

Posts: 2961
Joined: Wed Aug 06, 2008 4:01 pm

Re: Tax anomaly and HICBC

Postby robbob » Tue Jul 02, 2019 11:31 am

Hello Jcook

Whether you pay via tax code adjustment or cash - it all end up as the same amount - you pay now from net earnings - or you have a liability that is adjusted so it is still technically paid from net earnings albeit the tax code actually adjusts your tax free allowance and therefore somewhat confusingly there is an adjustment to taxable pay - this adjustment being an estimate needed for you to settle the tax bill from net pay - the technical checking bit is conducted by your year end p800/simple assessment/ sa302 tax calculation that will recalculate everything to get back to the correct results - ie sometimes the tax code adjustment made results in the wrong amount of tax being collected in year !!!

In summary either method is fine and works out the same - however if you pay cash its less likely to get messy later !!

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