Accountancy firm urges working parents to check child benefit tax liability ahead of deadline

Families and individuals who receive child benefit are being warned about an HMRC crackdown on unpaid tax.

HMRC is writing to individuals who received child benefit during the 2022-23 tax year, who they believe have not declared it correctly on their self-assessment tax return.

Individuals with taxable income over £50,000 need to pay back one per cent of child benefit for every £100 they earn over the threshold, meaning once they reach £60,000 of income it is all paid back.

The rules on repayment of child benefit were changed in April’s budget, increasing the threshold where tax is due from £50,000 to £60,000. The charge is now calculated as one per cent for every £200 of income over £60,000.

However, the levels of suspected underpayments for the 2022-23 tax year have prompted HMRC to act, with the threat of financial penalties for non-compliance.

Paislei Godley (pictured), associate director at West Midlands-based Prime Accountants Group, said individuals who receive a letter from HMRC mustn’t ignore it, and should take expert advice if they are unsure about what to do.

She said: “Child benefit is one of those things people don’t always think about because they don’t think of it as income.

“HMRC has clearly seen a spike in people not declaring tax properly or not completing tax returns at all. They will know – they’ll be running checks and seeing discrepancies.

“This prompt is to say, ‘we think you might have missed off or declared it incorrectly’. It invites taxpayers to check and amend their returns, and if you don’t do it you risk being penalised.”

Paislei said common errors HMRC will be picking up on is families who only declare for one child rather than two, or think that they don’t need to declare at all because their own salary is below the threshold – when in fact it is based on the highest earner in the household.  

“My advice is, if you’re unsure about it, speak to an expert and find out if you need to do something. If you get one of these letters from HMRC, don't ignore it,” she added.

HMRC has set a deadline of September 30 for people to amend their tax returns for the 2022-23 financial year where they have received these letters.

Its ‘One to Many’ approach sees it send a standard message to many customers, aiming to influence their behaviour and make them more likely to comply with their tax obligations.

For more information on Prime Accountants, which has offices in Birmingham, Solihull and Coventry, visit the website.