High income child benefit tax charge ― advising the taxpayer

Produced by Tolley

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • High income child benefit tax charge ― advising the taxpayer
  • Introduction
  • Options open to the individual
  • Election not to receive child benefit
  • Protecting national insurance credits for stay at home parents
  • Revoking the election
  • How to revoke the election
  • Revoking the election after the end of the tax year
  • Revoking the election for cash flow purposes during coronavirus (COVID-19) outbreak
  • Practical considerations
  • More...

Introduction

Introduced with effect from 7 January 2013, the high income child benefit charge (HICBC) acts to clawback child benefit payments where the person receiving the child benefit or their partner earns at least £50,000. The partner with the higher income is the person who suffers the charge.

The rate of the income tax charge is 1% for every £100 by which the adjusted net income exceeds £50,000. This means that complete clawback of the child benefit effectively occurs where the earnings are £60,000 or above.

Unless the person entitled to receive the child benefit elects not to receive it, the benefit is made as usual but that person or their partner will suffer the tax charge via the self assessment system.

For full details of the tax charge and a discussion of whose income needs to be considered when applying the charge, see the High income child benefit tax charge ― overview guidance note. It is suggested that you read that guidance note before reading on. The guidance below discusses the options open to the taxpayer, the practical implications and the ways in which the charge can be mitigated.

Options open to the individual

If the HICBC is due, the only options available to the individual are:

  1. suffer the tax charge, or

  2. elect not to receive child benefit (which simplifies matters, especially for those who would suffer full clawback of the child benefit)

The first option is discussed in the High income child benefit tax charge ― overview guidance note.

There are a few problems associated with the second option. In the first tax year in which the HICBC applies to the household, the election not to receive child benefit needs to be made at the start of that tax year to avoid the tax charge (which will actually be paid after the end of the tax year). The election can only be backdated by up to three months (see below). Therefore, if the benefit is received and the person

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