I’m a tax expert – why thousands of parents could get a surprise tax bill due to child benefit rules

HOUSEHOLDS will want to know these three big changes when the new tax year starts, a money expert Mitch Young has warned.

The new tax year comes into force tomorrow, April 6 2022, and will run until April 5, 2023.

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There are a number of key things you need to know about that will be happening from tomorrow, Fusion Consulting Group director Mitch Young said.

Mitch has decades of experience dishing out accountancy and tax tips, and explained how you can save money in the new tax year.

He’s one of the experts on The Sun’s Squeeze Team panel, here to help you battle against a cost of living crisis that is squeezing family budgets.

If you’re worried about making ends meet, are struggling to pay off your debts or don’t know how best to manage your cash, get in touch by emailing [email protected].

Here’s Mr Young’s tips on how to get tax savvy for the new tax year.

You can check out more of his tips on his TikTok account, @mitchthetaxman.

Tax warning for parents

Thousands of parents could face a surprise tax bill out of the blue because of child benefit rules.

The rules aren’t new – but it’s a sage reminder as the new tax year begins.

Child benefit is government support dished out to parents to help them look after their children.

It is worth £84.60 a month for the first child – or just over £1,000 a year – and £56 a month for an extra child.

But a high income benefit charge comes into force at a rate of 1% of the benefit for every £100 earned over this amount.

If either parent earns £60,000 or more the full amount must be repaid.

Families where a parent earns over £50,000 must tell the taxman and pay the tax charge.

Nearly 100,000 parents have been told they should probably be paying this – and that means they could see a bill land through their letterbox soon.

But there’s ways to avoid this for some, Mr Young said.

“If your income is over £60,000 you may therefore consider disclaiming child benefit to avoid a claw back tax charge,” he said.

“However, if the claimant of child benefit is not themselves working, then disclaiming it will mean the year does not qualify for State Pension purposes.

“In this scenario you should just ask for payment to be stopped rather than disclaiming it altogether.”

Higher tax for self-employed

Around 700,000 self-employed workers will face a higher tax bill because dividend tax is going up from tomorrow.

Self-employed workers and contractors pay themselves instead as a director of a limited company.

But the tax they pay on this – which is dividend tax – will increase by 1.25%.

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“Tax rates bands have been increased by 1.25% for 2022/2023 as part of the package of measures to fund social care and the NHS,” Mr Young said.

The rise will see the dividend tax rate for those in the basic rate tax band rise from 7.5% to 8.75%.

For those in the higher rate tax band, the dividend tax rate will rise from 32.5% to 33.75%.

The tax hike cannot be avoided, but it’s worth checking that you’re claiming back all the tax that you could be owed, Mr Young said.

You can claim for a working from home tax relief worth up to £125 – even if you’ve just worked one day from home – you’ll need to apply through HMRC for this.

And as many as 2.4million couples who have tied the knot are missing out on up £1,220 in tax relief through the marriage allowance.

Use your capital gains tax allowance

Capital gains tax is charged on the profit you make when you sell something that has gone up in value.

It could be anything such as stocks and shares, artwork, or even a second home.

In 2022/23, the first £12,300 you’ll make will be tax-free, Mr Young said.

After that you’ll be charged up to 28% depending on what rate taxpayer you are and what you sold.

If you’re planning on selling something and the profits could be over this amount, cashing in at the right time can keep profits below the threshold or reduce your capital gains tax bill.

For example, cash in stocks and shares in two transactions over multiple tax years rather than a single transaction.

So it might be an idea to make a transaction now before the new tax year tomorrow, Mr Young said.

“Each spouse has their own annual exemption, as do children – and as the annual exemption cannot be carried forward, it will be lost if not used.”

There’s also just one week left to claim up to £125 for working from home – we explain how.

We’ve also got 10 things you need to do right now to make the most of your money.

This post first appeared on thesun.co.uk