What is the Child Benefit High Income Charge?

Child Benefit Tax

Since January 2013, if you (or your partner) earns £50,000 or more, your family is not eligible to receive the full state Child Benefit entitlement. Here we look at how this charge works, and why it creates a controversial anomaly in the tax system.

What is the CBHIC?

Introduced by the Coalition Government, the Child Benefit High Income Charge aims to redistribute state benefits from the better off to the less well off by using a crude means tested formula to determine eligibility.

Child Benefit is currently paid at a rate of £20.70 for the first child, and £13.70 for additional children.

However, if you or your partner earns £50,000 or more during the tax year, the amount of benefit you are entitled to is reduced by 1% for every £100 you earn above this threshold. So, if one partner earns £60,000 or more, their entire entitlement is removed.

Significantly, if you and your partner earns £49,999 each (a total of £99,998 per year), your entitlement to Child Benefit is completely unaffected!

The charge is only applied if one of you earns £50,000 or more.

What can I do if I’m affected by the CBHIC?

You have two options available if you fall within the scope of this tax instrument.

Firstly, you can decide not to receive Child Benefit payments. If this is the course you wish to take, you may still want to fill in the claim form regardless, in order to receive National Insurance (NI) credits that coun towards your State Pension.

Alternatively, you can choose to receive Child Benefit and when the tax year ends, account for the Higher Income charge via the Self Assessment process.

One of the unfortunate consequences of this legislation is that up to a million people now have to fill in a tax return each year simply to comply with the charge.

What counts as income when calculating your CBHIC eligibility?

You need to calculate your ‘adjusted net income’ to determine whether or not your income for the tax year is higher than the £50,000 threshold.

‘Total taxable income’ includes any income from employment / self-employed profits, benefits, pensions, and rental income.

Use the Child Benefit tax calculator to work out if you or your partner has to pay the charge, and how much you have to pay.

Who pays the CBHIC?

The highest earning partner is responsible for paying the charge.

‘Partner’ means someone you’re not permanently separated from who you’re married to, in a civil partnership with or living with as if you were.

If you are separated from your partner, you can ask HMRC to let you know if your partner has a higher adjusted net income and/or receives Child Benefit.

How do I register to pay the charge?

Most people who visit our site already submit personal tax returns at Self Assessment time, so all you need to do is complete the relevant boxes on the SATR to account for any Child Benefit you have received during the tax year just gone.

If you have not already registered for Self assessment, you can find our more about the process here. You have to submit your tax return, and pay any tax due by 31st January in the year following the end of the tax year in question.

If you’d prefer to stop receiving Child Benefit altogether, rather than account for it via Self Assessment, you can fill in an online form or write to HMRC. Full details are available here.

Should your circumstances change at any time, you can restart your Child Benefit payments by contacting HMRC.