Parents of adults taxed by HMRC as if still getting child benefit

·3 min read
<span>Photograph: Realimage/Alamy</span>
Photograph: Realimage/Alamy

Parents of adult children who sit down to do their tax return this weekend should check if they are due a refund.

One Guardian reader has just discovered HM Revenue and Customs is taxing him as if his family is still getting child benefit, even though his two children are now 22 and 19, and the family stopped receiving the cash almost 18 months ago.

His case is similar to one featured in Guardian Money a year ago, involving a woman with a daughter in her 20s who received a £4,300 tax rebate because HMRC had wrongly carried on making deductions for child benefit for several years.

Earlier this week, HMRC said 4 million people had still not filed their 2020-21 self-assessment tax return and paid any tax owed ahead of what is still officially the deadline: Monday 31 January.

However, it was announced recently that those who file late will not be hit with a penalty, provided their return is submitted by 28 February.

Child benefit is currently paid at £21.15 a week for the eldest or only child, then £14 a week for each additional child, and is worth £1,828 a year for a family with two children.

You normally qualify if you are responsible for a child under 16 – or under 20 if they stay in approved full-time education or training, which includes A-levels.

Lots of families have been pulled into self-assessment because at least one parent has an income of more than £50,000. Under the government’s high-income child benefit charge, the payout is clawed back on a sliding scale.

The high-income tax charge is 1% of the amount of child benefit for each £100 of income on a sliding scale between £50,000 and £60,000. For those earning more than £60,000 the charge is 100% – in effect, they receive no child benefit.

The reader did his tax return a few days ago and was amazed to be told he was owed £815 for overpaid tax for 2020-21.

He has two children and has been affected by the tax charge for several years. However, his younger child stopped being eligible for the benefit in September 2020, shortly after leaving sixth form.

The refund related to deductions that HMRC had continued to make for child benefit, even though he became “free of the tax charge” a few months into the 2020-21 tax year.

His tax code notice letters for 2021-22 mentioned child benefit, and when he visited to look at his personal tax account, it stated that his current code includes a deduction of £2,650 for child benefit. This suggests he will be due another refund of at least several hundred pounds for 2021-22.

His case shows the importance of checking your tax code to make sure it is correct for your situation and not based on outdated or incorrect information. Many people file their tax code notice letters away without looking at them closely – or at all.

HMRC previously told Guardian Money that PAYE collects the correct amount of tax for the vast majority of customers, and that it will change someone’s tax code if it is notified of a change in circumstances.