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High Income Child Benefit Charge

By admin
04 May 2023
Accounts & Compliance

Child benefit is a tax-free payment available to households where there is a child who is:

  • Under 16; or
  • Under 20 if they stay in approved education or training (i.e. GCSEs, A-levels, BTEC qualifications etc).

It is available to anyone who qualifies regardless of income.  The benefit can only be claimed by one person for any given child, but you can claim for as many children as are in the household.  The benefit is a payment that is made every four weeks, but is calculated as a weekly amount.  The amount that can be claimed is:

  • £21.80/week for the oldest or only child
  • £14.45/week for every additional child

Therefore, if you have four children you could claim £65.15/week which equates to a payment of £260.60 every four weeks (or £3,387.80/year).

In addition to the payments above, the recipient receives National Insurance credits if the child is under 12 years old.  This can be particularly useful to ensure that there are no gaps in National Insurance “contributions years” in the event that you are not working or do not earn enough to pay National Insurance and can affect your entitlement to State Pension.

The High Income Child Benefit Charge

Whilst the benefit is available to anyone, irrespective of income, there is a clawback for households where the claimant or their partner has adjusted net income in excess of £50,000.  It is important to note that it is not necessarily both parents of the children whose income is assessed in this scenario, but the parental figures within a household.

The charge, known as the high income child benefit charge, was introduced on 7 January 2013 and is calculated as 1% of the benefit received for every £100 of adjusted net income over £50,000.  Therefore, when income reaches £60,000 the charge is 100%.

Adjusted net income is your total income (including taxable benefits from employment) less the gross amount of gift aid payments and pension contributions.

For example, imagine that you claim child benefit and received £1,000/year.  Your income is £55,000.  Your income is £5,000 over £50,000.  £5,000 divided by £100 is 50.  The charge is 1% for every £100, therefore the charge in this scenario is 1% x 50 = 50%.  You would have to pay back 50% of £1,000 = £500.

To pay the charge, you must register for self-assessment and complete a tax return.  The individual that must register and pay the charge is the partner that has the highest income.

The charge is only relevant when the claimant or their partner’s adjusted net income exceeds £50,000, not when household income exceeds £50,000.  Therefore, you might have a situation where both partners earn £50,000 (i.e. a total household income of £100,000).  In this case there is no charge.  However, if one partner was to earn £65,000 and the other partner earned nothing (i.e. total household income of £65,000) the child benefit charge would be 100% and the full amount would be repayable.

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