What is It?
The High Income Child Benefit Charge applies if you or your partner have an adjusted net income of £50,000 or more a year. Basically, it means that the amount of Child Benefit you’re entitled to reduces by 1% for every £100 you earn over £50,000. If your income is over £60,000, your Child Benefit disappears altogether.
A really important point is that it’s not your combined income as a couple that counts, it’s your individual income: the highest earning partner is responsible for paying the Charge.
If the child living with you isn’t your own child, the High Income Child Benefit Charge will still apply if the person receiving the Child Benefit pays at least an equal amount towards the child’s upkeep.
How Do I Work Out My Adjusted Net Income?
The calculation of your adjusted net income takes into account your income from all sources, such as:
- Your salary and bonuses
- Taxable benefits, e.g. a company car or private health insurance
- Self-employment earnings
- Property rental income
- Taxable savings
- Pension income
There are some items which can be deducted for, such as cycle scheme payments and gift aid donations. The HMRC website has a great calculator and we’d strongly recommend that you use it to calculate the Child Benefit you’re entitled to: this can be found at https://www.gov.uk/child-benefit-tax-calculator/main .
The High Income Child Benefit Charge is calculated on a tax year basis. For example, if your annual salary was £60,000 for the first six months of the tax year, and you then moved to part-time working with a revised salary of £30,000 for the second half of the tax year, your total income for the year would be £45,000, so the Charge wouldn’t apply.
What Do I Need to Do?
If you’re liable for the High Income Child Benefit charge, you have two options:
- Deregister from receiving Child Benefit altogether, or
- Continue to receive Child Benefit and pay back any Charge due at the end of the tax year.
Child Benefit is either paid in full or not at all – any reduction is managed through the tax self-assessment process. This means that you’d receive the full amount and then repay any Charge due as a personal tax liability or offset it against any overpayment of tax you may have already made.
If your income means that you’re still entitled to some Child Benefit, then it’s probably worth the effort of the tax self-assessment process. If you don’t already complete a tax return, you’ll need to register for self-assessment by 5th October following the tax year in which Charge was due, e.g. by 5th October 2017 for the tax year which ended on 5th April 2017. You can register for self-assessment at https://online.hmrc.gov.uk/shortforms/form/SA1 .
Should you decide to register from receiving Child Benefit, you can either do this online (you’ll need a Government Gateway account), by phone on 0300 200 3100 or by post at HM Revenue and Customs – Child Benefit Office, PO Box 1, Newcastle Upon Tyne, NE88 1AA.
Please note that even if you no longer receive Child Benefit, you still have to report any changes to your circumstances which would affect your entitlement to receive it, e.g. your child moving from full-time education to paid employment.
If your circumstances change, you can choose to restart receiving Child Benefit at any time.
We hope this has been useful – if you have any questions or comments, we’d love to hear from you.