I have always advised my clients to claim child benefit, even if they are a high earner and there will be the inevitable claw back in their tax assessment (the high income child benefit tax charge). 

My thinking was not just predicated on any limited cash flow advantage. It was based on the word “inevitable”. Could one be absolutely sure that one’s income would be above the £60,000 threshold at which child benefit is completely eliminated?

Fair enough if one’s income is in the stratosphere and there literally is no chance of such a dip and, if it did happen, it would be so catastrophic that the loss of a few bob of child benefit would be neither here nor there.

It could, however, be relevant for those people earning above £60,000 but not significantly so.

It could be that there is scope, with a cash windfall, for a pension contribution possibly to bring income down below a level where child benefit is in play.

For someone else, it could be a trading loss in the year which could be carried back to reduce income below the threshold.  That trading loss may have been created by heavy capital expenditure rather than a dip in trading.

The problem is that child benefit can only be backdated for up to 3 months.  Accordingly, you might establish after the end of a tax year that you were actually eligible for the whole of that tax year for child benefit.  Indeed, by the time your tax return is prepared and submitted, you may be out of time for any claim whatsoever in respect of that year.

We do not always know what is around the corner.  The Coronavirus crisis has brought that home to us in no uncertain terms. Many people are seeing a dip in their earnings for 2020/21. It may well bring a lot of people who were just over the £60,000 threshold will be down below it. There may be other people who were in between the £50,000 – £60,000 threshold and have a fall in income which will mean that they now have abatement of the child benefit.

Accordingly, it seems to me that people who might now have the prospect of a child benefit claim, without claw back, should definitely make the claim now.  If nothing else it will bring in some income into the household, even if there does prove to be a claw back after 5 April 2021.

If you would like any specific advice regarding this matter, please do get in touch.

The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.

Lambert Chapman Chartered Accountants

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