Setting up multiple companies to separate business interests can seem very straight forward. There are however important considerations. We explore the implications of owning too many companies.
My income has gone down because of Covid-19 – Should I reinstate my child benefit claim?
7 May 2020
COVID-19, Reducing Tax
Over the last few years many people have cancelled their child benefit payments because their income levels have meant they would otherwise need to pay back the benefit claimed in full through their self assessment Tax Return. However with the current crisis this may need a rethink.
2020/21 is shaping up to be a bad year for many of us. What with reduced income for directors, many employees being furloughed or made redundant and the self-employed making lower profits, income for many taxpayers in 2020/21 will fall below the £50,000 limit at which child benefit starts becoming taxable.
You normally qualify for Child Benefit if you are responsible for a child under 16 (or under 20 if they stay in approved education or training) and you live in the UK. The rate of Child Benefit increased from 6 April 2020 to £21.05 a week for the eldest child and £13.95 for each additional child. For a family with two children this is worth £1,820 a year- an amount which should not be ignored!
Once your income exceeds £50,000 you start to have a ‘high income child benefit’ charge. That is calculated at 1% of the benefit claimed for every £100 that adjusted net income exceeds £50,000. Once your income exceeds £60,000 the whole claim amount will be need to be paid back. For a couple who look after a child together HMRC will look at the taxpayer with the higher income and assess the additional tax liability on them.
Many people, whose income usually exceeds £60,000, have chosen to cancel the Child Benefit, rather than have to pay it back. However if their circumstances have suddenly changed we recommend that they reinstate their claims in case their income drops back below £60,000. The worse that could happen is that their income this tax year does exceed £60k after all and they need to pay the benefit back through the tax system. However there is no mechanism to claim arrears of child benefit on the basis that your income dropped.
If you think you might be impacted please call us so that we can update your records and help you with any claim or contact Jan Friend or Darren Hughes.
The content in this blog is correct as at 07/05/2020. See terms and conditions.
