Time to enjoy the summer and review your P11D

If you are a parent claiming child benefit and your salary is below £50,000, then you might think you do not have much to worry about. But have you thought about your car or medical insurance benefits? 

Up to April 2024, individuals with adjusted net income of £50,000 (£60,000 from April 2024) or more will have to pay a high-income child benefit charge (HICBC). Once their income goes above £60,000 for the 2023/24 tax year, any child benefit received will be completely clawed back. This is usually dealt with through their self-assessment tax return and any tax due is required to be paid by the end of January 2025 for the 2023/24 tax year.

A recent court case shows how a parent claiming child benefit became the subject of an HMRC enquiry that dragged on for several years because of an oversight. The family was claiming child benefit and the husband, who was the higher earner, had a salary of below £50,000. At first sight, this meant that he did not have to worry about a potential clawback of the child benefit. However, he forgot to check his P11D which included details of his car and fuel benefits which took his income over the £50,000 threshold. 

When HMRC did their usual checks, they noticed the discrepancy and sent him a nudge letter that advised the taxpayer to check whether he needed to pay the charge. It appears that the letter was not actioned, although the taxpayer did stop claiming the fuel benefit and called HMRC to inform them. A couple of years after the initial letter, HMRC sent the individual another letter to tell him he had to pay close to £6,000 in HICBC for several years. About a month later the taxpayer sent HMRC evidence of his income and HMRC replied asking for additional details. This back and forth continued over the course of almost two years and ended in court, where earlier this month it was decided that the individual had to pay the charge plus penalties. 

The moral of the story? You might want to check your P11D when you will receive it as it may tell you if you need to worry about the HICBC and if you need to submit a tax return by January 2025. 

If you are not yet registered under self-assessment, you will need to tell HMRC that you need to submit a 2023/24 tax return by 5 October 2024.