Contact Applegrow to discuss how the High Income Child Benefit Charge may affect your finances.
Child Benefit provides financial support to parents and carers for raising children. However, if you or your partner have higher income, you may be affected by the High Income Child Benefit Charge (HICBC) — an income tax charge that can reduce or eliminate the benefit.Capital Gains Tax applies when you sell or dispose of certain assets and make a profit. Careful planning can significantly reduce the tax payable by using available reliefs and exemptions correctly.
Child Benefit is a government payment to help with the cost of bringing up children. It is usually paid:
For children under 16, or
For young people under 20 in approved education or training
Payments are made based on the number of eligible children in the household.
If either parent’s income exceeds a certain threshold, the Child Benefit received may be subject to an income tax charge known as the High Income Child Benefit Charge.
Under the HICBC rules:
The charge begins when income exceeds the threshold (currently £50,000)
It increases gradually until it cancels out the Child Benefit received
Once income reaches a higher threshold (£60,000), the charge usually eliminates the benefit in full
This means that higher-earning households may effectively repay some or all of the Child Benefit through tax.
The Child Benefit Charge is calculated as a percentage of the Child Benefit received and depends on your adjusted income:
If adjusted income is above £50,000 but below £60,000, the charge increases gradually
For every £100 of income above £50,000, the charge increases by 1% of the Child Benefit received
At £60,000 and above, the charge reaches 100% of the benefit
This effectively claws back the Child Benefit through tax.
For the purposes of the Child Benefit Charge, adjusted net income includes:
Salaries and bonuses
Pension income
Self-employment income
Rental income
Interest and dividends
Certain reliefs and deductions may reduce adjusted net income, which can lessen the charge.
You generally need to complete a Self Assessment tax return and pay the charge if:
You or your partner receive Child Benefit, and
Either of you has adjusted net income over £50,000
Even if only one partner earns above the threshold, the charge still applies.
You can continue to receive payments and settle the charge through Self Assessment. This may make sense if your income varies or if Child Benefit offers National Insurance credits that support state pension entitlement.
Some families choose to stop Child Benefit payments to avoid the need for Self Assessment altogether. This might be preferable if the charge outweighs the benefit received.
Tax-aware planning, such as pension contributions or income timing, may reduce adjusted net income and lessen the charge.
Child Benefit also generates National Insurance credits, which can help build entitlement to the UK State Pension for parents who are not working or earning below the threshold for NICs.
Even if you choose to stop receiving the benefit to avoid the HICBC, you may still want to claim it to preserve these credits.
If the High Income Child Benefit Charge applies to you:
You must register for Self Assessment
File a tax return each year
Pay any tax due by the Self Assessment deadlines
Failing to report and pay the charge on time can result in interest and penalties.
The interaction between income tax, benefits, and personal finances can be complex. Applegrow Financial Advisors can help you:
Understand whether the HICBC affects you
Calculate the likely charge based on your income
Explore planning options to reduce the impact
Prepare and file accurate Self Assessment returns
We provide clear, personalised advice so you make informed choices about claiming Child Benefit and managing any associated tax charges.
Contact Applegrow to discuss how the High Income Child Benefit Charge may affect your finances.
