The High Income Benefit Charge (HIBC) came into effect on 7 January 2013 and affects anyone who has, or their ‘partner’ has ‘adjusted net income’ of more than £50,000 a year, one of whom receives child benefit.
You will NOT be affected if neither you nor your ‘partner’ has ‘adjusted net income’ of more than £50,000 per annum, or you are not entitled to child benefit.
For definition of ‘partner’ and ‘adjusted net income’ see below.
Amount of HIBC
If ‘adjusted net income’ is above £60,000 for one of you then the HIBC will equal the Child Benefit received i.e. 100% of it.
If ‘adjusted net income’ is between £50,000 and £60,000 for one of you then the HIBC will be 1% of the Child Benefit for every £100 your ‘adjusted net income’ is above £50,000.
What to do if you are affected?
- Opt out of Child Benefit altogether and therefore avoid the charge.
- Continue to receive Child Benefit but you must complete a Self Assessment Tax Return every year and pay the HIBC.
Option 1 Opt out:
To avoid a charge for a Tax Year you need to opt out.
To opt out you must complete the online form at:
Option 2 Continue to receive Child Benefit but pay HIBC:
You must register for Self Assessment and complete a Tax Return each year. To do this download, complete and send off the form at the link:
You must register by 5 October following the relevant tax year at the latest or you may face a penalty.
- Check if you are affected
- Choose an option an carry out required action
- Do consider taking advice from a Tax Practitioner or consult HMRC guidance at http://www.hmrc.gov.uk/childbenefitcharge/index.htm for complete details.
For these purposes a ‘partner’ is defined as:
- a person you are married to and you are living with - or have lived with during a tax year - and not permanently separated from
- a civil partner you are living with - or have lived with during a tax year - and not permanently separated from
- a person you are living with - or have lived with during a tax year - as if you are married or a civil partner
‘adjusted net income’ is worked out as follows:
- Calculate your taxable income: Taxable income will include:
- income from employment (including any company benefits)
- profits from self-employment
- taxable social security benefits
- pensions (including the State Pension)
- savings, dividend and rental income
- Take off any tax reliefs that apply:
- payments made gross to pension schemes - those have been made without tax relief (i.e. personal contributions to personal pension schemes usually not via payroll)
- trading losses, for example trade loss relief or property loss relief
- Take off any gift aided charitable donations at the grossed up amount e.g. if you gave £100 net the gross amount is £100 x100/80 = £125 Take off any contributions to a pension scheme where your pension provider has already given you tax relief at basic rate, take off the 'grossed-up' amount - what you paid plus the basic rate of tax. Eg if you paid in £1,000 then the grossed up amount is £1,000 x100/80 = £1,125