Child Benefit Tax Checks

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HMRC reduced High Income Child Benefit Tax checks during the pandemic because staff were redeployed on Covid-19 schemes, it has been revealed.

Compliance checks fell from a high of 125,594 in 2019/20 to just 45,553 in 2020/21, after they had doubled in the year before the pandemic. That year 96% of those checks resulted in tax being owed.

However, HMRC admits it has only ‘deferred’ these checks, and with more people getting caught in the net as wages increase, more families will start receiving letters.

Those who need to pay the charge must submit a Self-Assessment tax return each tax year, even if they are employed and normally pay their tax through PAYE.

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.

‘As wages increase, more families are going to get caught by the tax. The £50,000 threshold has remained frozen since the tax was first introduced in 2013. With the self-assessment tax return deadline looming at the end of January it’s worth checking now if you need to pay it.’

Fines for not declaring

Those who fail to notify HMRC that they owe the tax could receive fines of up to 30% on top of what they owe. However, since a penalty review in 2018 changed what constituted a ‘reasonable excuse’ for not declaring the  number of fines issued has fallen.

Sean 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.’

Disputing the tax

Since it was introduced in January 2013, the High-Income Child Benefit Tax has raised £2.95bn for HMRC.

It has saved the government an estimated £4.9bn on top of that from families opting out. At the last count 624,000 families had opted out of receiving it and 373,000 paid it.

However, the number of people fighting the tax charge is increasing and tax tribunal cases doubled last year.

Statistics are available here – High Income Child Benefit Charge – GOV.UK (