The High Income Child Benefit Charge affects thousands of families across the UK. Every year people are continuing to claim Child Benefit unaware that they may have to pay it back. HMRC have announced that they will be auditing claims, and if it is found that you have claimed too much, they will go back as far as 2013, with penalties of up to 30% plus interest being added to the amount due.
So what is the High Income Child Benefit Charge (HICBC)?
Where you or your partner have adjusted net income exceeding £50,000, HMRC claw back the child benefit that has been claimed at a rate of £1 for every £100 earned by the highest earner.
I know what you’re thinking – what is adjusted net income?
According to HMRC, your adjusted net income is ‘your total taxable income before any personal allowances and less things like Gift Aid’
It’s all very confusing isn’t it? But don’t worry HMRC have a handy tool to help you work out what your adjusted net income is – Child Benefit Tax Calculator
Your adjusted net income is over £50,000, what should you do now?
There are 2 options
- continue to claim Child Benefit – the highest earning partner will then complete a self assessment tax return annually, and pay it back through there
- stop claiming Child Benefit – if you choose this option you should still fill in the Child Benefit claim form and state why you don’t want to get payments. Without the form your child will not automatically get a National Insurance number when they are 16 AND a stay at home parent will not get National Insurance credits towards their State Pension
High Income Child Benefit Charge – Frequently Asked Questions
These are the questions we get asked most about HICBC
- Our household income is £70,000, but we each earn under £50,000, do we need to repay Child Benefit? No, you only need to repay if the adjusted net income for one of you exceeds £50,000
- My adjusted net income is £52,000, will I have to repay all of the Child Benefit I have received? No, but you will need to repay some. For each £100 you earn over £50,000, you will need to repay £1 of Child Benefit via a self assessment tax return
- I earn £52,000 and my partner earns £63,000, who pays the charge? The highest earner is responsible for paying the charge
- I earn over £60,000, my partner claims Child Benefit for their child, does this apply? Yes, even if the child living with you is not your own, this still applies
And the most frequently asked question of all
Help ! I have claimed Child Benefit and I’ve just realised I shouldn’t have done, what do I do now?
Firstly, don’t panic, you’ve realised before HMRC contacts you, which is great
Secondly, get in touch, we can explain your options and help you to get everything straight
If you need help with a Self Assessment Tax Return – here is a link to our service page