Family receiving child benefits hit with £7,400 bill after dad gets company car

A child benefit rule, introduced in 2013, means the family have to either come up with the cash or go to court.

A family-of-five have been left in financial turmoil after being handed a £7,400 tax bill that they say they cannot afford after changes to child benefit rules.

Richard and Rebekha Nicholls from Lincolnshire, have been told that the dad’s company car, given to him as part of his new job, means he has been pushed above a threshold requirement and has to repay some of the money back.

The child benefit rule, which was introduced in 2013, states that those who earn more than £50,000 have to pay back a certain amount of their child benefit in income tax.

This is currently set at 1 per cent for every £100 they earn over the threshold.

Although Richard’s salary is under the £50,000 limit, unknown to him, his company car is deemed as a ‘benefit in kind’ and took him over the threshold.

The family started claiming child tax benefit in 2012, after the birth of their first child, Enya. At that time Rebekha stopped working, while Richard worked as a mechanic and had a much lower salary than he does now.

In 2015, Richard got a new job, which vastly increased his salary, although he was still not earning more than £50,000.

But after he was given a company car, it was counted as an in-kind benefit, which was included in his income by HMRC.

The couple now have three children, having also welcomed Pippa and Ivy into the family, and have continued to claim child benefit – which they are entitled to do so.

Families to whom the rules apply are paid the full amount, but have to make arrangements to pay the part they are not entitled to back.

They can opt out altogether, but many choose not to as it is linked to National Insurance contributions.

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The couple have been left devastated that it has taken so long for the bill to come to light and which they have been told to repay within 16 months.

Richard said: ‘This all started in October when the tax office said that we should be paying the high income tax benefit charge, and asked us to fill out a self-assessment to figure out how much that we owe them.

‘Then at the end of January, we received a letter saying that we owed £2,500. But the following day we got another letter saying that this was wrong and it was in fact £7,400 we owed, and we are still yet to get a final bill figure, so it could be much more.’

The couple added that HMRC told them that failure to stump up the cash could result in them going to court.

Richard says he feels the charge ‘punishes the working man’.

He said: ‘If Rebekha and I were earning £40,000 each, we would have more money between us and not have to pay this charge, but because I am over a certain threshold we do, it does not seem right.’

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A HMRC spokesperson said that customers liable to the High Income Child Benefit Charge can elect to opt out of receiving payments of Child Benefit and still receive the other advantages of claiming it.

This includes protecting their NI contributions record, as well as ensuring their child receives an NI number in the future.

They said: ‘We use a wide array of channels to reach those who may be liable to pay the High Income Child Benefit Charge.

‘This includes putting information about the charge in packs made available to new parents which tell them how to claim child benefit.’

They said that anyone wishing to find out more about the charge and whether they are liable to pay it, could visit the site to clarify their position.