Covid-19 Update - High earning parents on furlough could now be in line for child benefit
Thousands of high-earning parents who opted out of receiving child benefit because they had to pay the high income child benefit charge (HICBC) could now be eligible to claim, if they experience a drop in income due to the coronavirus outbreak.
Many working parents who have previously stopped claiming child benefit because their earnings took them above the threshold for the HICBC, but have subsequently suffered a loss of income are being urged to consider reclaiming the benefit.
Anyone earning £60,000 or slightly more who has stopped claiming child benefit, but then loses 20% or more of their income under the government’s job retention scheme, would find their income falls to £50,000 or below and they are once again eligible to claim without being liable for the HICBC.
Parents earning under £60,000 but more than £50,000 after a drop in income could also claim child benefit, but would still have to pay a proportion back through the charge in their next tax return. Those who anticipate a drop in income this tax year to below the threshold might also want to start claiming again now, in advance of their income falling, if they need help with living costs now.
For the new tax year 2020/21, the amount parents can claim will rise to £21.05 a week for a first child and £13.95 a week per child for subsequent children – a rise of £32 a year to £1,820, up from £1,788 a year in the previous tax year, for a family with two children under 16.
‘Child benefit is a valuable source of extra help in these difficult times and we are urging parents who had abandoned it but have recently suffered a drop in income to sign up again to receive it.’
It is only possible to claim child benefit retrospectively for a period of three months – so people need to claim now (or in the near future), of they could lose money the family is entitled to.
What about the Marriage Tax Allowance? Can you now claim?
The tax break is worth £250 this year, which would be a welcome boost to couples who have had a pay cut due to Covid-19.
What is the Marriage Allowance?
The Marriage Allowance is available to both married couples and civil partners and was introduced in 2015.
It lets a non-taxpaying partner give up a portion of their unused personal allowance (the amount you can earn before paying tax) to the higher income-earning partner, which results in a lower tax bill for the couple.
The partner earning less than the personal allowance – currently £12,500 – gives up 10% of their allowance to their taxpaying partner. The taxpaying recipient must be a basic rate (20%) taxpayer and earn under £50,000 a year in England or £43,430 in Scotland.
It means the higher earner is able to earn more before paying tax, resulting in a £250 tax bill saving (20% on the £1,250 extra allowance) for the couple, via an adjustment of their tax code.
Visit gov.uk to find out more or contact us if you require assistance with this.
If you require any help navigating your way through this all then please do get in touch, we are here to help.
Disclaimer: The information contained in this article is intended to be a guide and is not intended to be exhaustive. No action should be taken on the basis of information contained herein without obtaining the necessary advice. No responsibility can be accepted for loss or damages occasioned to any person acting or refraining from acting as a result of the material contained herein.