HMRC has confirmed a £60,000 rule as UK households face a clawback scheme for Child Benefit. If you or your partner receives Child Benefit and at least one of you earns more than the threshold, you may have to pay the High Income Child Benefit Charge. This means you will have to pay some or all of your Child Benefit back.
How the Threshold Works
The charge may also apply if someone else gets Child Benefit for a child living with you and they contribute at least an equal amount towards the child's upkeep. An individual income is over the threshold if it is over £60,000 for tax years starting from 2024 to 2025, or over £50,000 for tax years up to and including the tax year 2023 to 2024.
Calculating Adjusted Net Income
To work out if your income is over the threshold, you will need to calculate your 'adjusted net income'. This is your total taxable income, including savings interest and dividends, calculated before any Personal Allowances and less certain tax reliefs such as pension contributions and Gift Aid.
Repayment Amounts
If you or your partner earn more than £60,000 a year, you will have to pay some of your Child Benefit back. If you or your partner earn £80,000 or more, you will have to pay all of it back. You will pay back 1% of your Child Benefit for every £200 you earn over the threshold.
HMRC, the Labour Party government's tax arm, provides an example: 'Your adjusted net income is £67,600 in tax year 2024 to 2025. This is £7,600 over the £60,000 threshold. As 7,600 divided by 200 is 38, you will pay back 38% of your Child Benefit.'
For previous tax years, the rules differ. If you or your partner earned more than £50,000 a year, you will have to pay some of your Child Benefit back. If you or your partner earned £60,000 or more, you will have to pay all of it back. You will pay back 1% of your Child Benefit for every £100 you earn over the threshold. For example, if your adjusted net income is £56,700 for tax year 2023 to 2024, this is £6,700 over the £50,000 threshold. As 6,700 divided by 100 is 67, you will pay back 67% of your Child Benefit.
Who Pays the Charge
If your adjusted net income is over the threshold and so is your partner's, then whoever has the higher income is responsible for paying the tax charge. 'Partner' means someone you are not permanently separated from who you are married to, in a civil partnership with, or living with as if you were.
