How to work out the High-Income Child Benefit Tax charge

How do you work out the High-Income Child Benefit Tax Charge? 

Subscribers see High-Income Child Benefit Tax Charge.

This is a freeview 'At a glance' guide that shows you how to calculate the High-Income Child Benefit Tax Charge.

At a glance

• Child Benefit may be claimed by parents or guardians who are responsible for bringing up a child who is under 16, or under 20 if they stay in approved education or training.
  
  • From 3 January 2024, claims for Child Benefit may be made online.
• The High-Income Child Benefit Charge (HICBC) is a tax charge paid by higher earners which claws back up to 100% of any Child Benefit received by the higher earner or their partner.
  • It was introduced from 7 January 2013 by Finance Act 2012.
• The HICBC is only payable when the adjusted net income of the Child Benefit claimant or their partner exceeds the earnings threshold of £50,000 up to 5 April 2024, rising to £60,000 from 6 April 2024.
• The charge is reported and collected under Self Assessment (SA).
• There is no specific penalty that applies to the HICBC: standard late notification and late payment penalties under SA apply.
• Taxpayers who must declare the HICBC are required to register for SA and pay their HICBC by 31 January following the end of the tax year.

Exception:

An election may be made not to receive Child Benefit. This will mean the HICBC will no longer apply.

• It is only worthwhile making the election if the adjusted net income of one partner is in excess of the income threshold.
• There may still be good reasons to claim Child Benefit even where income exceeds the threshold. See High-Income Child Benefit Charge (HICBC)

The charge is worked out according to a fraction:

ANI - L % x Child Benefit received
    X

Where ANI is adjusted net income for the tax year

L is £50,000 (£60,000 for 2024/25 on), and

X is £100 (£200 for 2024/25 on)

2023/24 example : if  your income is £55,000 and you receive Child Benefit of £1,885, your HICBC is £942 (50% of £1,885).

2024/25 example: if your income is £70,000 and you receive Child Benefit of £2,212.60, your HICBC will be £1,106.

Always round down to the nearest whole number.

This table shows you a step-by-step method which achieves the same result.

The charge applies to Child Benefit paid on or after 7 January 2013. The charge applies to a taxpayer with income over the income threshold per year if they or their partner are in receipt of Child Benefit in that tax year.

Where income exceeds uppder threshold the effect of the charge is that all Child Benefit paid is repaid to the Government.

Workings for 2023/24

 Proposed thresholds:

Workings for 2024/25

'Adjusted net income'

A person’s adjusted net income for that tax year is determined as follows:

• Step 1: Take your net income for the year, which is your total taxable income including employment income, self-employed income net of trade losses, rental and investment income, and other taxable benefits etc, less any pension contributions that are paid gross.
• Step 2: Deduct the grossed-up amount of any gift made under Gift Aid.
• Step 3. Deduct the grossed-up amount of pension contributions paid in accordance with s.192 FA 2004 (where your pension provider has already given you relief at the basic rate).
• Step 4. Add back any relief under section 457 or 458 (payments to trade unions or police organisations) that was deducted in calculating the individual’s net income for the tax year.

See Adjusted Net Income

Adjusted Net Income calculator

This can be used to estimate your adjusted net income.

Enter your gross taxable income or allowable loss and any payments made before any allowances are claimed.

Enter Gift Aid payments. if you are an Income Tax payer and have made a payment to charity and completed a Gift Aid declaration.