UHY Ross Brooke Chartered Accountants

Should you claim Child Benefit if you are a high earner?

child benefit and income tax

Background to Child Benefit

In January 2013, Child Benefit entitlement was withdrawn on a sliding scale on those households where at least one of the individual’s adjusted net incomes exceeded £50,000 per annum. The entitlement was entirely withdrawn where at least one of their adjusted net incomes exceeded £60,000 per annum.

One controversial aspect is that a couple with incomes of £49,999 each, will obtain maximum Child Benefit whilst a single parent family earning £60,000 will lose all of the benefit.

The current rate for the 2022/23 tax year is £21.80 per week for the eldest or only child and £14.45 per week for any other children. The child must be under the age of 16 or under the age of 20 if they are still in education or training.

Who is affected by the HICBC?

Should you claim Child Benefit if your income is over the High Income charge (HICBC) threshold? If you or your partner have an individual income that’s over £50000 and either:

  • You or your partner receive Child Benefit
  • Someone else gets Child Benefit for a child living with you and they contribute at least an equal amount towards the child’s upkeep (it does not matter what the relationship to the child living with you is)

then you may have to pay the HICBC. Note that the earnings threshold includes all income, including rental income, savings interest, bonuses.

If your income is over the threshold, should you still claim child benefit?

You could opt to receive child benefit and pay tax on it when you file your self assessment, or you could choose not to receive it in the first place.

However, if you choose not to receive payments, you should still complete the Child Benefit Claim form, but declare that you do not want the payments. Although this seems counter-intuitive, it will ensure that the National Insurance credits are paid which count toward the state pension* and the child will be automatically issued a National Insurance number before their 16th birthday. *The form should be completed in the name of the non-tax payer if possible .

If your income was previously below the threshold, but has now risen above it, you should either opt out, or pay the additional tax at year end.

How to pay the HICBC

You will need to complete a self assessment tax return and pay the tax by 31st January of the following year. If you do not declare your child benefit, you may receive a penalty from HMRC.

Please get in touch if you need help with your self assessment or deciding how to allocate your child benefit.

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