High Income Child Benefit Charge

The Basics

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?

1. Opt out of Child Benefit altogether and therefore avoid the charge.
2. 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:

https://online.hmrc.gov.uk/shortforms/form/CBOptOut?dept-name=&sub-dept-name=&location=43&origin=http://www.hmrc.gov.uk

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:

http://www.hmrc.gov.uk/sa/forms/sa1.pdf

You must register by 5 October following the relevant tax year at the latest or you may face a penalty.

In Summary:

• 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.

Definitions

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:

1. 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
2. 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
3. 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