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 Child Benefit Tax Charge.

At a glance

• 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 £50,000 p.a.
• The charge is collected under Self Assessment (SA).
• There is no specific penalty that applies to the HICBC: standard 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 £60,000.
• There may still be good reasons to claim Child Benefit even where income exceeds £60,000. 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, and

X is £100

So, if your income is £55,000 and you receive Child Benefit of £1,885, you will find that your tax charge is £942 (50% of £1,885).

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 £50,000 per year if they or their partner are in receipt of Child Benefit in that tax year.

Where income exceeds £60,000 the effect of the charge is that all Child Benefit paid is repaid to the Government.

'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.

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