Understanding High Income Child Benefit

HMRC are asking employers to help their employees understand the High Income Child Benefit Charge. In this issue of our blog, we break down what it is that you and your employees need to know.

 

What is the High Income Child Benefit Charge?

1. The High Income Child Benefit Charge applies where an individual receives child benefit and either they, or their partner, have total taxable income of £50,000 or more.
2. The charge is 1% of the benefit received for every £100 income by which taxable income exceeds £50,000.
3. If the individual or their partner has taxable income of over £60,000 then the full amount of any child benefit paid to them is repayable in the form of a tax charge
4. If both partners earn over £50,000 then the charge is levied on the person with the higher taxable income.

 

How can you check if you need to pay it?

1. Check your annual income on your P60 or personal tax account, remembering to add any taxable benefits including medical insurance, company cars and so on.
2. Use the Child Benefit Calculator to find out if you are liable for the charge
3. Register for self-assessment if you are liable to pay the charge.

 

What else do you need to know?

Employees may prefer to opt out of receiving child benefit rather than to receive it and then have to pay it back again in the form of tax. However, even if the employee does opt out of receiving the payments, it is still important to register for the benefit as it carries National Insurance credits. This is particularly important where one of the parents does not pay enough National Insurance for the year to qualify for state pension purposes.

 

For further help and support with Child Benefit, National Insurance, and State Pension, contact your accountant.