Warning issued over child benefit tax penalty charges

Taxpayers who could find they are liable for tax charges on child benefit have been advised to take action swiftly to ensure they have notified HM Revenue and Customs to avoid being hit with a penalty charge. The tax system now recoups some of the benefit from households where the highest earner has an annual income of over £50,000.

This advice comes from NFU Mutual, which has established via a Freedom of Information request that the average charge since the tax was introduced in 2013 was £1,220. Chartered Financial Planner at NFU Mutual Sean McCann warned that while the self-assessment form is clear on this issue, those on a salary will often "fall foul" of this law, with a "nasty surprise" from the taxman with an extra penalty on top of the tax coming eventually.

He noted that those in the £50-60,000 salary range can bring down the charge by making a larger pension contribution, stating, "Because by reducing taxable income some or all of the Child Benefit can be kept, the effective tax relief on these pension contributions can be huge - up to 65% for someone with three kids."