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High Income Child Benefit charge

You may be liable to this tax charge if you, or your partner, have an individual income of more than £50,000 and one of you gets Child Benefit or contributions towards the upkeep of a child. If you are liable, you may be required to submit a Self Assessment Tax Return.

This webpage is not a full and comprehensive description of all the law relating to Child Benefits, and should be used as a guide only, and should not be regarded as authoritative. Any person instructing Fabtax will be given specific advice relevant to their circumstances.

We can do the calculations for you from as little as £25. If you are required to file a Self Assessment Tax Return, this service is available from just £99. So, just £100 for the piece of mind of knowing that you're paying the right tax and receiving the correct Child Benefit.

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Quicklinks

Who is affected by the High Income Child Benefit charge?   |  Who is not affected?  |  What to do if you're affected  |  How the tax charge works  |  Changes in circumstances  |  Calculating adjusted income  |  How to stop your Child Benefit payments  |  How to restart your Child Benefit payments  |  Claiming Child Benefit

Who is affected by the High Income Child Benefit charge?

Definitions for the purposes of deciding if this affects you:-

Income is income before tax and deduction of 'Personal Allowance'

A partner is:

• 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

Does this affect you?

You will be affected by the High Income Child Benefit charge if during a tax year any of the following applies to you:

• you have an individual income of more than £50,000 and are entitled to receive Child Benefit
• you have an individual income of more than £50,000 and live (or have lived) with a partner who's entitled to receive Child Benefit
• both you and your partner have an income of more than £50,000 per year, you have the higher income and one of you is entitled to receive Child Benefit

You will also be affected if during a tax year you have an individual income of more than £50,000 and both of the following apply:

• someone else is entitled to receive Child Benefit for a child who lives with you
• they're entitled because they contribute at least an equivalent amount of Child Benefit towards the child's upkeep, for example pocket money or clothes

It doesn't matter if the child that is living with you is not your own child.

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Who is not affected?

You will not be affected if:

• both you and your partner have an individual income below £50,000 for a tax year
• neither you or your partner are entitled - or have been entitled - to receive Child Benefit

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What to do if you're affected

If you instruct FABTAX, then we will prepare and submit the tax return on your behalf. You need not worry about it.

You will need to choose to do one of the following:

• Keep receiving Child Benefit payments - but if you do you will need to declare the amount you or your partner are entitled to by filling in a tax return each year and registering for Self Assessment if you haven't done so already.
• Tell the Child Benefit Office that you want to stop receiving Child Benefit payments - in which case you won't be liable for the tax charge and won't need to fill in a tax return (unless you need to for other reasons). If you have not already done this before 5th April 2016, you will be liable for the year ended 5th April 2016, and will have to submit a return. How to stop claiming
• You will be liable to submit a self assessment return for all periods from 7th January 2013 up until the 5th April AFTER the date you stop receiving payments.

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How the tax charge works

If you instruct FABTAX, all these calculations will be done on your behalf – you need not worry about them

The amount of the tax charge will be based on the amount of Child Benefit entitlement and the level of what is known as 'adjusted net income'. The tax charge is worked out on your income, after certain adjustments are made, and the amount of Child Benefit you or your partner are entitled to receive. Find out more about how it’s worked out.

The amount of the tax charge

The amount of the tax charge will depend on the amount of:

• Child Benefit entitlement
• the level of your 'adjusted net income'

The amount of the tax charge will differ according to whether your income is:

• between £50,000 and £60,000
• £60,000 or more

You can find out more about adjusted net income by going to the section below 'Adjusted net income'.

Charge on income of £50,000 to £60,000

The tax charge will be 1 per cent of the Child Benefit paid for every £100 of income between £50,000 and £60,000. The tax charge will be less than the total amount of Child Benefit.

Charge on income of £60,000 or more
If your individual income is £60,000 or more, the tax charge will be equal to the full amount of Child Benefit you, or your partner, are entitled to receive.

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Changes in circumstances

Some changes can affect whether you are liable to the High Income Child Benefit charge, or how much you might have to pay. These can include when a partner moves in or leaves, changes in income or changes in your entitlement to receive Child Benefit.

You must report any changes in circumstances that could affect your Child Benefit entitlement, for example if your child no longer lives with you or you move to live abroad. You must do this even if you have decided to stop receiving the payments.

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Adjusted net income

If you instruct FABTAX, all these calculations will be done on your behalf – you need not worry about them.

Some people need to calculate their 'adjusted net income' because it can affect the amount of tax you have to pay. Find out if you are affected, what adjusted net income is and how to work it out.

Who is affected by adjusted net income?

Your adjusted net income will affect your tax if any of the following apply. You are liable to the:

• income-related reduction to the Higher Personal Allowances - where you born before 6 April 1950 and have an adjusted net income of over £26,100 (tax year 2016-16)

• income-related reduction to the Personal Allowance - where you have an adjusted net income over £100,000 (regardless of your date of birth)

• High Income Child Benefit charge - where you have an adjusted net income above £50,000

What is adjusted net income?
Adjusted net income is total taxable income less certain tax reliefs, for example for:

• trading losses
• donations made to charities through Gift Aid
• pension contributions paid gross (before tax relief)
• pension contributions where your pension provider has already given you tax relief at the basic rate

Work out your adjusted net income
Work out your adjusted net income by following steps one to four below.

Step one - work out your 'net income'
Add up your taxable income.
Include things like:

• 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

Take off any tax reliefs that apply like:

  • payments made gross to pension schemes - those have been made without tax relief
  • trading losses, for example trade loss relief or property loss relief

This is your 'net income'. Your net income is then adjusted - steps two to four below.

Step two - take off  Gift Aid donations

If you made a Gift Aid donation, take off the 'grossed-up' amount - what you paid plus the basic rate of tax.
So, for every £1 of Gift Aid donations you made, take £1.25 from your net income.

Step three - take off pension contributions
If you made a contribution 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.
So, for every £1 of pension contribution you made, take £1.25 from your net income.

Step four - add back tax relief for payments to trade unions or police organisations

Tax relief of up to £100 is available if you make payments to a trade union or police organisation for superannuation, life insurance or funeral benefits.
If you took off an amount for this type of payment at step 1, add it back.

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How to stop your Child Benefit payments

If you are entitled to receive Child Benefit and either you, or your partner, are liable for the High Income Child Benefit charge, you can choose to stop receiving your Child Benefit payments. Find out who should do this, when and how.

Before you decide to stop your payments

Before you stop your payments it's worth knowing the following:

• If your, or your partner's, individual income is between £50,000 and £60,000 you might not want to stop Child Benefit payments. This is because the tax charge will always be less than the amount of Child Benefit.
• If your, or your partner's, individual income is more than £60,000, the tax charge will always be the same as the amount of Child Benefit, so you may want to stop the payments. But there are some income adjustments that may apply, such as pension contributions, which could bring your income level down to below £60,000. This could reduce your tax charge.

You can check the likely tax charge by using an online calculator if you haven't already done so. Only use this calculator if your income is more than £50,000 and your income is higher than your partner's.
Even if you decide to stop your Child Benefit payments, you can always start them again later on.

Who can stop the payments

Only you - as the person entitled to receive Child Benefit - can stop the payments. You don't have to stop them if you don't want to. You won't be able to stop your payments if you're paying back an overpayment of Child Benefit (or certain benefits paid by another country) from your current Child Benefit payments.
Authorised agents will soon be able to stop the payments on behalf of their clients.

Appointees

You can stop the payments if you are an 'appointee'. An appointee is someone who acts on behalf of a person who can't manage their affairs, for example because of a disability.

When you can stop the payments

You can ask to stop your payments at any time.

• if you have decided to stop your payments after 5th April 2016 whoever is liable to the tax charge will have to declare the amount relating to the period from 7 January until the date the payments stop on their 2016-16 tax return
• if you stopped your payments by 28 March whoever is liable to the tax charge will only need to complete a tax return for the 2016-16 tax year (unless they need to do so for other reasons)

How to stop your payments


You can stop your Child Benefit payments by:

• using an online form
• calling the Child Benefit Helpline or writing to the Child Benefit Office
If you don't want to stop your payments
If you don't want to stop your payments, then whoever is liable to the tax charge will have to:
• declare the Child Benefit payments to HMRC by registering for Self Assessment and filling in a tax return
• pay a tax charge based on the amount of your Child Benefit entitlement

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How to restart your Child Benefit payments

Only the person who is entitled to Child Benefit can ask for the payments to be started again - although authorised agents will soon be able to request that payments are restarted for their clients.

You can restart your Child Benefit payments by:

• using an online form
• calling the Child Benefit Helpline or writing to the Child Benefit Office

Depending on who has the higher income, one of you may still be liable to a tax charge from the point you restart your Child Benefit payments.

When you can restart your payments

You can decide to start receiving Child Benefit payments again at any time.
For income over £60,000 your payments can only restart from the Monday after the Child Benefit Office gets your request.

Restarting when income drops below £60,000

If you or your partner's income drops to below £60,000 for a full tax year, you can apply to restart your Child Benefit payments for up to two years after the end of that tax year.

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Claiming Child Benefit

If you decide to stop your Child Benefit payments it won't affect your entitlement to Child Benefit.
As long as you, or your partner, are entitled to receive it you should still complete a Child Benefit claim form for any new children. This is because entitlement to Child Benefit:

• can help you qualify for National Insurance credits that can protect your entitlement to State Pension
• can help protect your entitlement to other benefits such as Guardian's Allowance
• ensures your child is automatically issued with a National Insurance number before their 16th birthday

You must report any changes in circumstances that could affect your Child Benefit entitlement, for example if your child no longer lives with you or you move to live abroad. You must do this even if you have decided to stop receiving the payments.


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Key HMRC Deadlines

31/12/19: Last date for filing online returns if you wish any tax due under £3000 to be collected via PAYE. Only remaining!
31/01/20: Last date for filing online tax returns. Only remaining!
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