The High Income Child Benefit Charge explained

The charge is a tax that effectively repays some or all of your Child Benefit once income passes a threshold. It is based on adjusted net income, which is your total taxable income minus certain reliefs, such as pension contributions and Gift Aid donations.

GOV.UK gives the current position as: the charge applies once income is over £60,000, and at £80,000 or more the full amount of Child Benefit is repaid. The rate is 1% of your Child Benefit for every £200 over the threshold. For example, adjusted net income of £67,600 is £7,600 over, which is 38% of the Child Benefit repaid.

Before the thresholds were raised, the charge started at £50,000 and increased faster, at 1% per £100. Older tax years are still calculated on the rules in force at the time.

The person with the higher income in the couple pays, whichever of you claims the benefit. If you are both on similar incomes, it is still the higher earner's income that counts for the charge.

You have two routes, and GOV.UK also gives a third option:

• Through PAYE: the charge is collected through your tax code as you go.
• Through Self Assessment: you declare it on your return. You must use this route if you already file a return for another reason, such as self-employment or investment income, or if the PAYE deadline has passed.
• Opt out of payments: you can stay registered for Child Benefit but stop receiving the money, which avoids the charge. You keep the National Insurance credits that count towards your State Pension.

Who needs to file a return →

Because the charge is based on adjusted net income, contributions that reduce that figure, such as pension contributions or Gift Aid donations, can reduce or remove the charge. For directors, the mix of salary and dividends and any employer pension contributions can also affect the number.

Director pension contributions →

We prepare and file Self Assessment returns for directors, sole traders and landlords, and tell you exactly what is due and when before anything is submitted. Call 0114 327 1480.

Our Self Assessment service →