Until 2013, family allowances were available to all UK families and were not means tested or income dependent. However, in 2013 that changed and anyone earning over £ 50,100 a year was then asked to pay back one percent of every £ 100 over the threshold – those earning over £ 60,000 were asked to reimburse it in full.
Critics of the tax say it has not been promoted very well and unfortunately this has led to some people receiving a tax bill of thousands of pounds, when they could have simply opted out if they knew the rules.
Even now, hundreds of parents are unaware of this change and experts fear that higher base rate taxpayers will be hit by this burden in the next few years.
HM Revenue and Customs (HMRC) raised £ 409million from HICBC in 2019/2020 and, according to NFU Mutual analysis, this represents a 3% drop from the £ 421million in the last year.
In August 2020, 624,000 families had chosen not to receive family allowances, indicating that the message has finally been broadcast.
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The £ 50,000 threshold hasn’t changed since 2013, but Child Benefit is probably the last thing people think of when they get a raise, so it could catch up with them.
Sean McCann, Certified Financial Planner at NFU Mutual, said: “This drop in revenue from high income family allowances is likely due to an increasing number of families opting out of family allowances altogether.
“The £ 50,000 threshold has not changed since 2013, which means more families are being taken in as incomes rise.
“While some choose to repay the allowance, many others with incomes over £ 60,000 who lose all of their family allowances due to taxes choose not to receive the payments.”
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Do I still have to apply for family allowances if my partner has a higher income?
Withdrawing may be the easiest option for many families with income above the threshold, but it is important to listen to expert advice so that if one parent is not working, they still receive credit. national insurance that will affect his right to a full state pension.
To ensure this is not lost, the non-working parent will still have to apply for child benefit but refuse to receive any actual payment – it is worth doing now so that the non-working parent do not pay the price in the future.
Mr McCann explained: “It is essential that the claim be made by the payment without work, rather than by the high income partner.
He added: “Families with non-working parents failing to register for child benefit could count the cost many years into the future.”
This orientation may need to be taken into account by more families in the coming months because despite the Covid pandemic hitting the economy, some people are seeing their salaries increase, according to the latest figures from the ONS.
While that in itself can only be described as good news, working parents could find themselves in a worse situation if they receive an unexpected tax bill.
And it’s important to remember that the threshold applies to a person’s adjusted net income.
An individual’s adjusted net income is the money they have left after personal allowances such as pension deductions and they can increase the amount they pay into their pension to avoid losing family allowances.
In order to calculate whether their income exceeds the threshold, taxpayers can consult the government’s Family Allowance Tax Calculator website.
If a person’s income exceeds the threshold, they will either receive family allowance and pay any tax burden at the end of each tax year, or choose to forgo family allowance payments.
People who waive payments can still complete the benefit claim form to claim National Insurance (NI) credits, which will go towards their state pension.