What is High Income Child Benefit Charge?

On 7th January 2013 the High Income child benefit charge came into force. This will affect anybody who earns over £50,000 per tax year and receives Child Benefits at any level. If both parents earn over £50,000 then the High Income charge must be added onto the self-assessment tax return of the highest earner.

What is the charge?

For every £100 the individual earns over £50,000 there is a charge of 1% - that is £1. This is a sliding scale meaning that if the individual has over £60,000 they must pay back all of their child benefit as a charge on the tax return.

Examples

Individual A has an income of £55,000 and his spouse earns less than £50,000. The couple receive child benefit for 2 children of £20.30 + £13.40 per week. This is a total of £1,752 for one whole year.

The percentage of the child benefit which must be repaid is based on the calculation £55,000 - £50,000 =£5,000/£100 = 50%. This means that 50% of £1752 = £876 must be paid back through tax on individual A’s tax return.

Individual B has income of £65,000 and her spouse earns £53,000. Individual B must complete a tax return and enter the High income child benefit charge, rather than her spouse. The couple also have 2 children and receive £1,752 each year.

The percentage of child benefit which must be repaid is 100% because individual B earns over £60,000 meaning an entry of £1,752 additional tax on her tax return.

Ways to avoid the income tax charge:

You can either opt out of receiving child benefit or ensure that you keep your yearly income below £50,000.

If you would like to discuss this topic in more depth or want help planning how to keep your income below £50,000 please get in contact with us.