The High Income Child Benefit Charge (HICBC) is a tax charge that must be paid when the individual annual income of a Child Benefit claimant or their partner exceeds £50,000. The charge repays back up to 100% of the Child Benefit that’s been paid to the higher earner or their partner.
Combined income or household income is not considered – it’s only if one partner earns over the threshold amount of £50,000 a year, the HICBC applies. When one partner earns between £50,000 – £60,000 a year the charge, which is claimed back through income tax is 1% of the total Child Benefit per extra £100 they earn over the £50,000/yr threshold.
If one partner earns over £60,000, the full amount of Child Benefit will be reclaimed back. As the charge is paid back via income tax, this requires the high earning partner to complete a self-assessment declaring their taxable income.
Taxable income includes:
- money you earn from employment
- profits you make if you’re self-employed
- some state benefits
- most pensions, including state pensions, company and personal pensions and retirement annuities
- rental income (unless you’re a live-in landlord and get less than the rent a room limit)
- benefits you get from your job
- income from a trust
It can still be worth continuing to claim Child Benefit and paying it back, depending on your circumstances.
Claiming Child Benefit will help you protect your State Pension. If you’re off work looking after your child and not paying National Insurance contributions, claiming Child Benefit will ensure you get credits towards your State Pension.
Additionally, if you don’t claim, you might also miss out on:
- other benefits such as Guardian’s Allowance
- your child being automatically issued with a National Insurance number before their 16th birthday.
Even if you don’t think you’ll be entitled to anything because either you or your partner earns over the £50,000 tax-free limit, it’s still worth claiming so you don’t miss out on National Insurance credits.
It’s important to not rely on receiving notifications from HMRC regarding the High Income Child Benefit Charge, as it’s considered to be the burden of the tax payer to ensure their tax affairs are dealt with correctly.
If you would like further advice on the HICBC, or if you would like us to prepare and submit a self-assessment on your behalf please do contact us on email@example.com