HMRC has published details that you may need to pay the High Income Child Benefit Charge if you or your partner have an individual income that is either £50,000.00 or above.
This is for individuals and their partners that receive child benefits and for those who receive child benefits for a child living with them, it does not matter if the child living with is not their own child.
To work out what income counts as over the threshold, you need to work out your adjusted net income, before any tax deducted and before any allowances.
This includes income from:
- your salary before tax (with pension contributions under net pay arrangements deducted)
- other employment income, for example bonuses
- taxable benefits provided by your employer, for example the value of medical insurance, a company car or anything else included on your P11D
- income from pensions before tax, for example from a state pension
- other income before tax, for example taxable profits from self-employment, taxable savings and dividends
- income from property before tax, for example taxable rental income and any taxable benefits provided by your employer such as medical insurance
Sir Steve Webb, a former pensions minister who is now a partner at consultants LCP (Lane Clark & Peacock) has said:
“One of the many flaws of the high income child benefit charge is the way it has caught thousands of families unawares. Parents with simple tax affairs who would not normally have to fill in a tax return have needed to do so once their annual income exceeded £50,000, perhaps because of a pay rise or bonus.''
If your income is over the threshold you can choose from the following:
- to receive Child Benefit payments and pay any tax charge at the end of each tax year by filing a self-assessment tax return
- to opt out of receiving payments and not pay the tax charge
Child benefit is effectively withdrawn at a rate of 1% for each £100 earned by the higher-income partner over £50,000 a year. Therefore, the benefit is fully withdrawn where income of the higher-income partner reaches £60,000 a year.
Internet links: High Income Child Benefit Charge
If you want to understand how this could affect you then please get in touch
