Q. My tax affairs are very straightforward. I have a salary which is taxed under the PAYE system and I have never needed to complete a self-assessment return. I have recently received an unexpected bonus which has also been subject to PAYE so I assume a self-assessment return is still not required. Is this correct?
A. As a general rule, if you owe no tax and have not been notified by HM Revenue & Customs that a self-assessment is required then you do not need to submit one but this general rule might be over-ridden if you or your partner are in receipt of child benefit. An income tax charge arises on the child benefit if an individual in receipt of benefit has adjusted net income in excess of £50,000 and does not have a partner or is the higher earner of two partners.
The charge will also apply in certain other cases including the situation where the individual is the higher earner and the other partner receives the benefit. Two individuals are partners if they are married and not separated; if they are not married but are living together as husband and wife; if they are civil partners who are not separated; or if they are not civil partners but are living together as if they were civil partners.
In this particular case, the adjusted net income is likely to be the salary and bonus, possibly revised downwards to take into account certain gift aid payments and pension contributions. If adjusted net income exceeds £60,000 then the tax charge is 100 per cent of the child benefit received.
In other cases the percentage rate of tax is found by dividing the excess over £50,000 by 100. For example, if the adjusted net income is £56,000 then the rate of tax payable on the benefit received will be 60 per cent.
In either case, submission of a self-assessment return will be required and tax payable. Future years’ tax will normally be collected by an adjustment to the PAYE code but the individual can instead opt to pay on the normal tax due date.
The individual can also elect not to claim the child benefit. This option might appeal to an individual who is paying the tax charge at 100 per cent and would otherwise have no requirement to submit a self-assessment return.
Individuals who find they are liable to the tax charge will need to notify HM Revenue & Customs and register for self-assessment by 5 October following the tax year for which the charge first arises.
On online tax charge calculator is available at www.gov.uk/child-benefit-tax-calculator Individuals who find they are liable to the tax charge will need to notify HM Revenue & Customs and register for self-assessment by 5 October following the tax year for which the charge first arises
Ben Chaplin is managing director of Croner Taxwise