HMRC has issued guidance to clear up confusion surrounding the High Income Child Benefit Charge, a tax that certain DWP claimants must pay when their income exceeds a threshold. The clarification came after a customer contacted HMRC about discrepancies between their manual calculations and the official Child Benefit tax calculator.
Customer Query Highlights Confusion
The customer expressed concern over a lower figure provided by the online calculator compared to their own manual calculation. They asked: "When using the Child Benefit tax calculator, it seems to provide a lower payment than my manual calculation. Which do I use? Is the calculator rounding down significantly? More than just the pence."
This relates to the High Income Child Benefit Charge, which requires claimants to repay a portion of their Child Benefit if their income exceeds £60,000 per year. For every £200 earned above this threshold, 1% of the benefit must be repaid. Once income reaches £80,000, the entire amount must be repaid.
HMRC's Response and Key Advice
HMRC initially asked why the customer needed the figure, and the customer replied that they needed to settle the charge. HMRC then provided general guidance: "If you've received the benefit for a whole year without changes, the calculator should give the correct value."
The customer explained they had only begun receiving payments partway through the year, as their child was six months old. HMRC advised: "Then your calculation may be more accurate if there was any backdating when you applied for the benefit."
The customer clarified that the calculator requested the total Child Benefit received and they had entered the precise amount. They asked if the tool could "be relied on as accurate." HMRC assured them: "You should be able to rely on it. You do need the exact dates for it to work." The tax authority added: "The calculator will give you the right figure, just make sure you're using the same start date as we used to calculate your claim."
Rounding and Accuracy
The customer noted that the calculator reduced their expected sum by 0.68p. HMRC explained: "We don't tax fractions of a pound, so that's the right answer."
High Income Child Benefit Charge Amounts
Child Benefit is currently worth £27.05 per week for the eldest or only child, equating to £1,406.60 annually, and £17.90 per week for each additional child, or £930.80 per year. For a household with two children and an individual income of £80,000 or more, the total repayment would be £2,337.40 per year.
