How do you work out the High Income 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 a higher earner or their partner.
  • The HICBC is only payable when the income of the child benefit claimant or their partner exceeds £50,000 p.a.
  • The charge applies to households from 7 January 2013.
  • The charge is collected under Self Assessment (SA).
  • This new legislation was introduced by the Finance Act 2012.
  • There is no specific penalty which 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, if so, the HICBC will no longer apply.

  • It is only worthwhile making the election if adjusted net income of one partner is in excess of £60,000.

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 £1,752, you will find that your tax charge is £876 (50% of £1,752).

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 on 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.

Take the Child Benefit received in the year

 

1752

 

1752

 

1752

A. Divide by 100

17.52

17.52

17.52

Take actual net income

55,000

60,000

70,000

Deduct base income

(50,000)

(50,000)

 

Excess

5,000

10,000

 

B. Divide by 100

50

100

 

Income tax charge:

 A X B

 

17.52 x 50 =£876

 

17.52 x 100 = £1,752

 

All benefit is repaid £1,752

 

“Adjusted net income”

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

  • Take for the total taxable income for the tax year, this includes employment income, self-employed income (net of trade losses) rental and investment income and other taxable benefits etc
  • Deduct the grossed up amount of an gift made under Gift Aid
  • Deduct the grossed up amount of pension contributions paid in accordance with s192 FA 2004 (where your pension provider has already given you relief at the basic rate)
  • 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

For further information and details and tribunal decisions:

See High Income Child Benefit Tax Charge & tax planning  (subscription content)

Comments (8)

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This comment was minimized by the moderator on the site

[(Your taxable income - 50,000)/100X child benefit received = tax your own to HMRC .

Example. Table income = 54000. child benefit received in this tax year is 1762 for the tax year 19/20,

then:
54000-5000/100 = 40%, Meaning 40% of the CB...

[(Your taxable income - 50,000)/100X child benefit received = tax your own to HMRC .

Example. Table income = 54000. child benefit received in this tax year is 1762 for the tax year 19/20,

then:
54000-5000/100 = 40%, Meaning 40% of the CB received will be paid back to HMRC. This is equivalent of (1762*40%) = 704.8. Pay HMRC this amount by 31/01/2021

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I’m confused, I’m trying to complete the self assessment and I don’t know what figure to use. They say to deduct the pension contribution from the P60 figure, is that right?
Also, you said that they can claim back up to 100% but they asking more...

I’m confused, I’m trying to complete the self assessment and I don’t know what figure to use. They say to deduct the pension contribution from the P60 figure, is that right?
Also, you said that they can claim back up to 100% but they asking more than that.. we received 1076.40 per year and they are asking back more than 1500.....can you help me please??? We also found out recently about this....

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Hi

Please can you confirm the following ref child benefit.....

I am on PAYE and not self employed. My total earnings will be 54k including commission. I have worked out on the online calculator that I have to pay back just under £800. I called...

Hi

Please can you confirm the following ref child benefit.....

I am on PAYE and not self employed. My total earnings will be 54k including commission. I have worked out on the online calculator that I have to pay back just under £800. I called the Child Benefit call centre and they confirmed that they don’t take having a company car into account as income, simply my salary and commission. Does this sound right? I will be on 73k from now on so will be cancelling the payment!

Thanks

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My son was not aware of the £50,000 rule, nor that because he has a company car his income is classed as >£50,000. He isn't arguing that he owes the money but the demand for payment by 18th Jan 2020 is harsh given that he owes tax going back to...

My son was not aware of the £50,000 rule, nor that because he has a company car his income is classed as >£50,000. He isn't arguing that he owes the money but the demand for payment by 18th Jan 2020 is harsh given that he owes tax going back to 2016. Surely HMRC should have done something about this sooner and adjusted tax codes rather than demanding lump sum payments?

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Does the Adjusted Net Income include any benefits (car etc) and salary before any tax deductions?

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My son has just received a letter from HMRC with regards to HICBC, dated back to its concept, my query is why was this charge not made more public? and why has HMRC left it 6yes before contacting my son

Guest
This comment was minimized by the moderator on the site

Hi,

You reference 'net income here'. just for clarity, could you please define net income as I am trying to establish the figure to declare.

Many thanks in advance.

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This comment was minimized by the moderator on the site

Added for you. The High Income Child Benefit Tax Charge & tax planning article linked at the bottom provides more detail.

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