The High Income Child Benefit charge – the basics
If you or your partner has an individual income of more than £50,000 and one of you gets Child Benefit, you may be liable to the High Income Child Benefit charge. It may also apply if someone else receives Child Benefit for a child who lives with you.
It is essential that if you fall within these criteria you read and understand the following information. If you have any queries you should seek advice as soon as possible.
Who is affected by the High Income Child Benefit charge?
You will be affected by the High Income Child Benefit charge if during a tax year any of the following applies to you:
- you have an individual income of more than £50,000 and are entitled to receive Child Benefit
- you have an individual income of more than £50,000 and live (or have lived) with a partner who’s entitled to receive Child Benefit
- both you and your partner have an income of more than £50,000 per year, you have the higher income and one of you is entitled to receive Child Benefit
You will also be affected if during a tax year you have an individual income of more than £50,000 and both of the following apply:
- someone else is entitled to receive Child Benefit for a child who lives with you
- they’re entitled because they contribute at least an equivalent amount of Child Benefit towards the child’s upkeep, for example pocket money or clothes
It doesn’t matter if the child that is living with you is not your own child.
Your income will generally be your income before tax and deduction of ‘Personal Allowance’.
Who counts as a ‘partner’?
For the High Income Child Benefit charge, a partner is one of the following:
- a person you are married to and you are living with – or have lived with during a tax year – and not permanently separated from
- a civil partner you are living with – or have lived with during a tax year – and not permanently separated from
- a person you are living with – or have lived with during a tax year – as if you are married or a civil partner
Who isn’t affected
You won’t be affected if:
- both you and your partner have an individual income below £50,000 for a tax year
- neither you or your partner are entitled – or have been entitled – to receive Child Benefit
What to do if you’re affected
You will need to choose to do one of the following:
- keep receiving Child Benefit payments – but if you do you will need to declare the amount you or your partner are entitled to by filling in a tax return each year and registering for Self Assessment if you haven’t done so already, or
- tell the Child Benefit Office that you want to stop receiving Child Benefit payments
If you decide to stop the Child Benefit payments, you will:
- still need to declare any Child Benefit you were entitled to receive up to the point the payments stopped (the earliest date this can apply from is 7 January 2013)
- not have to complete a tax return if your Child Benefit payments stop for a whole tax year – unless you need to for other reasons
Only the person who is entitled to Child Benefit can stop the payments.
How the tax charge works
The amount of the tax charge is based on the amount of Child Benefit entitlement and the level of what is known as ‘adjusted net income’.
Claiming Child Benefit
If you decide to stop your Child Benefit payments it won’t affect your entitlement to Child Benefit. As long as you, or your partner, are entitled to receive it you should still fill in a Child Benefit claim form if you have not already done so.
This is because entitlement to Child Benefit can help protect your entitlement to:
- other benefits such as Guardian’s Allowance
- Relevant Other Child Allowance (which reduces the amount of income the Child Support Agency take into account when calculating any child maintenance payment due)
It can also:
- help you qualify for National Insurance credits that can protect your entitlement to State Pension
- ensure your child is automatically issued with a National Insurance number before their 16th birthday
Changes in circumstances
Some changes can affect whether you are liable to the High Income Child Benefit charge, or how much you might have to pay. These can include when a partner moves in or leaves, changes in income or changes in your entitlement to receive Child Benefit.
This post is by Kellie Knight of Knight Accountants She says, “If you would like any further advice in this area, why not contact us and one of our qualified, experienced team will be more than happy to assist you.” Knight Accountants are an award winning family run firm, specialising in small business services.