Lost income associated with the COVID-19 pandemic means that many families, who have not historically claimed Child Benefit in respect of their minor children because one of them has had an income above £60,000 per annum, should reconsider their position in this regard.
However, 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.
Child Benefit (£21.05 for the eldest child and £13.95 for subsequent children) is available to all families in theory, but from a practical perspective, is only available in full where the highest earner in the family earns under £50,000 per annum.
Where the highest earner in the household has income between £50,000 – £60,000 per annum, the Higher Income Child Benefit Charge (HICBC) – a tax clawback – gradually reduces the real value of Child Benefit to £nil. The HICBC has meant that many families who have traditionally had at least one earner earning over £60,000 per annum have simply waived their entitlement to Child Benefit – e.g. to avoid subsequent tax return filing requirements.
However, with many employees being furloughed on reduced salaries and the self-employed subject to income losses, many families who have historically opted out of Child Benefit may now become entitled to Child Benefit again – whether in full or in part.
Whilst furloughed salaries and payments under the Government’s Coronavirus Self-Employed Support Scheme would be considered income for Child Benefit purposes (along with regular salary, self-employed profits, letting income and the like), many families will still have the highest earner having significantly lower incomes in 2020/21 than has previously been the case.
Some families might be tempted to wait for a few months, to see how long the Coronavirus lockdown lasts and get a better understanding of what their income could be for 2020/21. But it is only possible to claim Child Benefit retrospectively for a maximum period of three months. So, unless they are careful, many families could lose money they are entitled to needlessly.
If the position is unclear, claim the Child Benefit now – if one’s income subsequently is higher than £60,000 for the year, one can always settle the position via filing a tax return and paying the HICBC.
If you would like to discuss any of the above or have other queries about how you can make the right decisions for the future of your business and your income, please contact your usual Blick Rothenberg contact or Robert Salter.
You can also visit our Coronavirus – Practical Guidance for businesses today Hub for our latest updates and insights.