Child Benefit is money given to parents or those who are responsible for raising a child. The high-income child benefit tax charge is a one-of-a-kind tax in that it uses the self-assessment tax mechanism to reallocate a state benefit; in this case, child benefit.

This tax payment is imposed when one of the child’s parents or guardians earns more than £50,000 in a tax year. The charge has been divisive and unpopular, owing to two factors: it is considered unfair to single-parent households. It has resulted in the self-assessment of many taxpayers who would not otherwise be required to do so.

Application of high-income child benefit charge

The charge for high-income children’s benefits applies when:

  • Child benefit was due to the parent or their wife, and one member of the family had an annual income of more than £50,000.
  • It should be remembered that the law only recognises the higher earner’s income, not the household’s total income. As a result, if a couple earns £49,999 each, they will not be affected by this income tax charge.
  • For these purposes, income is described as ‘adjusted net income,’ total income minus losses, pension contributions, and gift aid contributions, but before personal allowances.
  • For every £100 of your earnings above £50,000, you will be charged 1% of the amount of child benefit you earn. If the individual’s income exceeds £60,000, the charge would be equal to the family’s amount of child support.
  • Individuals may opt not to pay the charge and demand the child benefit instead.

Example of child benefit high-income charge

Robert and Julie have two kids, aged 13 and 17. Robert’s annual salary is £55,000. They receive £1,752.40 a year in child benefit (£20.30 for the elder child plus £13.40 for, the younger child = £33.70 x 52 = £1,752.40).

Robert’s additional tax would be equal to 50% of the overall child support they receive since he receives £5,000 more than the £50,000 mark (£55,000- £50,000 = 5,000 divided by 100 = 50%).

This means that, though they will continue to receive £1,752 in child benefit, Robert will be required to file a tax return and pay an additional £876 in tax for that tax year. This is equal to 50% of £1,752.