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High-Income Child Benefit Charge

Child Benefit is a benefit that is paid to those responsible for children under the age of 16-years (20-years if they are a full-time student). This benefit is paid monthly by the government directly into your bank account.

There is no limit to the number of children you can claim Child Benefit for, although the amount of money you receive per child does vary slightly. If you choose not to claim Child Benefit for whatever reason, you are advised to still fill in the Child Benefit claim form as it will enable you to receive National Insurance credits, which will, in turn, contribute towards your State Pension – as well as enable your child/children to more easily get a National Insurance number when they reach the age of 16. The current rate for Child Benefit stands at £20.70 per week for the first child and £13.70 per week for every other child thereafter. Therefore, if you have two children, you will receive a total of £34.40 each week.

If you or your partners’ individual income is higher than £50,000 a year, you will likely be subject to a tax charge from HMRC. This charge is payable through your yearly Self-Assessment form, of which you must complete so as to avoid any subsequent fines or penalties given for failing to accurately report your income. Self-Assessment forms are easy to complete and are available online. You are advised to visit the HMRC website to see whether you are required to complete a Self-Assessment tax form or not.

High-Income Child Benefit Charge

The High-Income Child Benefit Charge is a tax charge amounting to 1% of any Child Benefit you receive for every £100 of personal income you receive over the £50,000 threshold. What this means is that if you earn more than £60,000 a year, the additional tax you will be required to pay will cancel out the Child Benefit payments you will receive.

To help you better understand how the High-Income Child Benefit works, we have created the following example – this example excludes any other benefits, taxable income or allowances that you may receive.

Let’s say you have three children, you would be able to receive £48.10 every week in Child Benefit Payments. This would amount to £2,501 for the entire year. If you or your partner does not earn individually more than £50,000 per annum, your Child Benefit payments will be tax-free. However, if you or your partner earns more than the £50,000 threshold, the situation changes. For example, if you were earning £55,000 every year, your individual income would be £5,000 over the Higher Income Child Benefit Charge. As you are charged tax on every £100 you earn above the £50,000 limit, you would be charged as follows:

  • £5,000 / £100 = 50
  • 1% of £2,501 (Child Benefit received) = £25.01
  • 50 x £25.01 = £1,250.50

This means that in this example, you would have to pay tax on the £1,251 in your Self-Assessment.

What if I receive other benefits?

If you receive other benefits, they may mean that your individual income exceeds the £50,000 threshold. You are required to declare all benefits you receive in your Self-Assessment form, regardless of whether this pushes you over the threshold or not. If this does occur, you are advised to contact HMRC to get more detailed advice on what this will do regarding your Tax and National Insurance payments.

Why do I need to declare my income?

As a business owner, you are required by law to declare your annual income – wherever it comes from, such as income gained from rental payments and any other benefits or allowances you receive. You must provide as much detail as possible as this then enables HMRC to work out how much Income Tax and National Insurance you will have to pay for that tax year. The Self-Assessment form is available at HMRC’s website – enabling you to complete the form and submit it entirely online. Because your tax payments are calculated using the information you provide, you are advised to be as transparent and thorough as possible to avoid any discrepancies which may lead to problems and even penalties later on.

How to claim Child Benefit

If you are not currently claiming Child Benefit but believe that you are entitled to, then you will need to fill out a CH2 form. Once you have completed this form, you will need to submit it, along with your Child’s original birth certificate to the Child Benefit Office. You will of course get your child’s birth certificate back regardless of whether your application is successful or not. If you do not have your child’s birth certificate, you can still submit your application as long as you ensure you forward the birth certificate as soon as you have it.

Additional benefits of claiming Child Benefit

Even if you or your partner earn more than the threshold and are therefore not eligible for Child Benefit, or you simply just don’t want to benefit from it, there are still some advantages to registering for it. Firstly, claiming Child Benefit will help protect your State Pension. For example, if you are claiming Child Benefit, you will still be able to get credits towards your State Pension – this also applies to people not working, and therefore not paying any National Insurance, because you are looking after your child. Other related benefits associated with applying for Child Benefit include being eligible for Guardian’s Allowance and your child being automatically issued a National Insurance number before their 16th birthday – as opposed to you having to apply for one yourself. As you can see, there are numerous other advantages to claiming Child Benefit, particularly regarding your National Insurance and State Pension credits.

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