The ‘High Income Child Benefit Charge’ applies to an individual with income over £50,000 where either they or their partner received child benefit in the tax year or someone else received the benefit for a child living with them and they contributed at least an equal amount towards the child’s upkeep. Where both partners together have income greater than £50,000, the charge is levied on the higher earner; if their income is the same, the person who receives the child benefit pays the charge. ‘Partner’ does not have to be a spouse or civil partner – the charge also applies to unmarried couples living together as spouses or civil partners.
The charge claws back 1% of child benefit for every £100 by which the ‘adjusted net income’ exceeds £50,000. Where adjusted net income is £60,000 or more, the charge is 100% of the child benefit received in the tax year. ‘Adjusted net income’ for these purposes is income after taking account of any Gift Aid donations and pension contributions and, for the self-employed, trading losses.
If income is higher than the threshold, you can either claim the benefit and pay the tax charge by 31 Jan, having completed the relevant section of the tax return or not claim the benefit.
Where the charge is equal to the full amount of the child benefit, it may seem easier not to claim it, rather than claiming only to have to pay it back. However, child benefit paid for a child under 12 comes with National Insurance credits, helping to build up entitlement to the state pension. Therefore, if you do not otherwise pay sufficient NIC credits for the year to be a qualifying year, failing to claim may adversely affect your state pension.