THOUSANDS of parents have been warned they could face demands to give back child benefit – and there could be huge fines for failing to repay.
Mums or Dads earning over £50,000 must pay the High Income Child Benefit Charge (HCBC) if they get the benefit.
Child benefit is worth £84.60 a month for the first child – or just over £1,000 a year – and £56 a month for an extra child.
Anyone affected by the high income charge must file a tax return and the deadline for doing this is fast approaching on January 31.
Around 1.6million are set to be affected by the tax charge this year – around one in five families,
Before the pandemic hit, more than 120,000 families were contacted by HMRC for failing to comply with the rule, according to data from NFU Mutual.
The HCBC means if either parent earns over £50,000 then they have to pay a tax charge on the benefit.
The tax charge is paid at a rate of 1% of the benefit for every £100 earned over this amount.
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If either parent earns £60,000 or more the full amount must be repaid.
But many parents are not aware of the charge which came in from 2013.
The Sun has previously spoken to parents who were hit with surprise bills of thousands of pounds.
If you fail to file a self-assessment tax return you could be fined up to 30% of what you owe by HMRC
The number of people chased by HMRC dropped because of the pandemic – but the taxman is still doing checks that could result in demands hitting parents doormats.
Sean McCann, chartered financial planner at NFU Mutual, said: “HMRC dramatically increased the number of checks they made before the pandemic when over 120,000 families were contacted in a single tax year, but as staff were redeployed to deal with Covid schemes, that figure collapsed.
“Families who didn’t receive reminder letters last year shouldn’t assume the tax isn’t owed.
"If you have income over £50,000 and receive child benefit or live with a partner who does, you may need to repay it.
He added that with the self-assessment tax return deadline looming at the end of January it’s worth checking now if you need to pay the tax charge.
You need to file a self-assessment tax return by January 31, and do this for every year that you're affected.
30% fine
Some parents continue to claim child benefit and to pay the charge because it helps them to build up national insurance credits, which you need to qualify for the state pension.
If you fail to let HMRC know and don't pay the tax charge, they can fine you – on top of what you owe.
The value of the fine can be up to 30% of the amount, unless you have a "reasonable excuse".
A reasonable excuse is not outlined by HMRC or the defined by the law but you must have a good reason for not meeting your tax obligation and you'll need to prove this.
More than 1,000 penalties were handed out in the 2029/20 tax year and nearly 5,000 the year before.
If you are fined and think you shouldn't have been you can appeal.
McCann said: “Although the number of fines being issued on top of the tax for failing to notify HMRC has fallen, the taxman is still likely to chase you if you ignore their reminder letters.”
Check out our guide to filing your tax return.
You can use the government's child benefit tax calculator to see how you might be affected.
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