April tax returns and child benefit
The new tax year is well and truly upon us, the telephone has started ringing and it feels like this year could be the year that all the 2024 Tax Returns are prepared and submitted to HMRC well ahead of the 31st of January 2025, there are some good reasons as to why you may wish this to happen.
In the week that Angela Raynor (Shadow Deputy Prime Minister) finds herself being investigated by the police, in an incident that relates to her to her Private Principle Resident nomination following the election made or not. All this could have been easily resolved by taking the Tax Matters team Capital Gains advice some weeks ago she is not following my LinkedIn posts where she could have obtained some free advice.
You heard about The High-Income Benefit Charge in the Budget, beware you may need to take some action, it's not just a news headline.
April is here
For many of you, it won't come as a surprise when I say you should think about preparing and submitting your tax return as quickly as possible, that’s what all tax advisors say every year.
However, there are benefits to filing early, including removing the last-minute stress of preparing in January and running the risk of a late filing penalty.
I would strongly suggest that many of you should consider prioritising this, as there are several instances where filing early could benefit your pocket.
For those of you who are higher rate and additional higher rate taxpayers and who made private pension contributions in the year ended 5th April 2024 you may be due a tax refund, all the time the refund is sitting with HMRC you are losing the opportunity to reinvest the refund back into your pension and obtain the growth potential.
Did you sell a second property last year (buy to let or holiday home) there is the possibility that when you completed the 60-day Capital Gains Report to HMRC the gain was calculated at 28%, by preparing your tax return you will be able to identify if any of the gain could have been subjected to a tax charge of 18%. If so then you will be able to claim the balance, in a recent phone call with HMRC I was advised that such claims take seventeen weeks to process and that the claim even though identified within your tax return will require a separate telephone call to them to initiate, this was news to me. Incidentally, the call time for me to find out the new approach resulted in a 1 hour and 8-minute hold time and a further 25 minutes to process, on this basis, you are looking at the refund being in your account in mid-August.
If you have invested in the Enterprise Investment Scheme (EIS) or similar products, SEIS & VCT then again you will be looking to claim the Income Tax relief of 30%, 50% and 30% retrospectively as quickly as possible. It is worth noting that though HMRC pays interest at 4.25% as of August 2023, in the current climate I'm positive you can find a further investment that would give you a much better return than HMRC.
For many, there is the looming worry of the second 2024/25 payment on account due on 31st July 2024. Preparing your tax return early could provide you with the option of reducing that payment based on your income within your 2024 tax return or even being able to reclaim either in full or part the payment made in January 2024, if you don’t check you will never know, and do you want to leave any potential refund with HMRC for any time longer than you need too.
The reasons keep on coming if you are preparing your tax return then remember that the HMRC software does not allow you to complete Capital Gains, Foreign pages, or Land and Property pages. In addition, you cannot prepare Partnership or Trust tax returns either, therefore you will need to complete a paper copy that needs to be submitted before the 31st of October (that’s scary).
Finally, if you are PAYE and you have a tax liability of £3,000 provide that you complete and submit your tax return ahead of 30th December then you can request that the tax be collected through your 2025/26 PAYE code, yet another reason amongst many to take action today and avoid the last minute stresses of January.
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It's more important than a front-page headline.
Taxpayers with eligible children affected by the previous £50,000 high-income child benefit charge must opt back into child benefit within three months. The threshold has now been raised to £60,000 from 6 April for the high-income child benefit charge (HICBC), allowing families with one taxpayer earning up to £80,000 per annum to still benefit from child benefit payments to some extent.
The charge is tapered, meaning if a parent or their partner earns between £60,000 and £80,000, it may still be advantageous to claim child benefit. There's a 1% charge on child benefit for every £200 of income exceeding £60,000. If income surpasses £80,000, the charge equals the amount of the child benefit payment.
However, it's crucial to note that the deadline to opt back into child benefits is 5 July 2024.
This is particularly relevant for families who ceased claiming child benefit in prior tax years due to the child benefit clawback, triggered when one partner earned at least £50,000 annually. The clawback typically resulted in families with one taxpayer earning above £60,000 annually receiving no net income from claiming child benefits.
Although the child benefit clawback system remains, the rules were eased in March’s Budget. Hence, families with the highest-earning taxpayer earning no more than £80,000 annually should proactively register for child benefit from 6 April 2024 to avoid losing entitlement.
While some families, especially those with irregular earnings or who are self-employed, may hesitate to claim child benefit before knowing if one partner/spouse will exceed the £80,000 threshold in a tax year, waiting can be costly. Child benefit claims can only be backdated for up to three months. Delaying could mean missing out on entitled benefits.
Additionally, child benefit rates have increased. For the eldest child, it rose from £24 to £25.60, while for other children, it increased to £16.95 from £15.90. Families with one child can now receive up to £1,331 annually, marking an increase of £83.20 per year, and up to £881 annually per additional child, an annual increase of £54.60.
If I or the Tax Matters team can be of any assistance to you, your family or your friends then please do not hesitate to contact me at 01442 828006 or jreeves@taxmatters.tax