HMRC is set to recover £1,406 worth of Child Benefit from parents earning above a certain threshold, according to a recent warning. The High Income Child Benefit Charge (HICBC) recovers Child Benefit through the tax system if you or your partner have an adjusted net income exceeding £60,000.
How the Charge Works
The charge is tapered: you repay 1% of your Child Benefit for every £200 earned between £60,000 and £80,000. Once your income reaches £80,000, the charge equals 100% of the benefit, meaning you must repay the full amount.
The Labour Party government website explains: "You or your partner may have to pay the High Income Child Benefit Charge if either of you receives Child Benefit and at least one of you earns more than the threshold. This means you will have to pay some or all of your Child Benefit back."
The charge may also apply if someone else receives Child Benefit for a child living with you and they contribute at least an equal amount towards the child's upkeep.
Child Benefit Value
Child Benefit is worth £1,406 over a calendar year for claimants. HMRC adds: "It does not matter if the child living with you is not your own child."
Income Thresholds
An individual income is over the threshold if it exceeds £60,000 for tax years starting from 2024 to 2025, or over £50,000 for tax years up to and including 2023 to 2024.
To determine if your income is over the threshold, you need to calculate your 'adjusted net income'. This includes your total taxable income, such as savings interest and dividends, calculated before any Personal Allowances and after deducting certain tax reliefs like pension contributions and Gift Aid.
Repayment Details
If you or your partner earn more than £60,000 a year, you will have to repay some of your Child Benefit. If you earn £80,000 or more, you must repay all of it. You repay 1% of your Child Benefit for every £200 earned over the threshold.
If both you and your partner have adjusted net incomes over the threshold, the person with the higher income is responsible for paying the tax charge.
A 'partner' is defined as someone you are not permanently separated from and whom you are married to, in a civil partnership with, or living with as if you were married or in a civil partnership.
