The High Income Child Benefit Charge comes into play when either you or your partner receives Child Benefit and one of you has an individual income exceeding £50,000. Additionally, 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, you may still be subject to this charge. Importantly, it doesn't matter if the child living with you is not your own child; the charge is based on income thresholds.
Calculating Your Income
To work out if your income exceeds the £50,000 threshold, you'll need to calculate your 'adjusted net income.' This figure is derived from your total taxable income before any allowances and excludes items like Gift Aid. It's worth noting that your total taxable income includes various sources, including interest from savings and dividends. To make this process easier, you can use the Child Benefit tax calculator to estimate your adjusted net income.
Responsibility for Paying the Charge
If both you and your partner have adjusted net incomes exceeding £50,000, the responsibility for paying the High Income Child Benefit Charge falls on the person with the higher income. A 'partner' refers to someone you're not permanently separated from, whether you're married, in a civil partnership, or living together as if you were married.
Options If Your Income Exceeds the Threshold
If your adjusted net income exceeds £50,000, you have two options:
Receive Child Benefit Payments and Pay the Tax Charge: You can continue to receive Child Benefit payments and settle the associated tax charge at the end of each tax year.
Opt Out of Receiving Child Benefit Payments: Alternatively, you can choose not to receive Child Benefit payments, thereby avoiding the tax charge altogether.
Filling Out the Child Benefit Claim Form
Even if you decide to opt out of receiving Child Benefit payments, you should still fill out the Child Benefit claim form. On the form, clearly state that you do not wish to receive payments. There are several reasons for doing so:
National Insurance Credits: By filling out the claim form, you can still receive National Insurance credits, which contribute towards your State Pension.
National Insurance Number for Your Child: Your child can get a National Insurance number without having to apply for one separately. They will typically receive the number before turning 16 years old.
If you need any help in understanding if the High Income Child Benefit Charge is applicable to you and your family, get in touch and we can talk things through. You can contact the team on accounts@cubeaccounting.co.uk or call our office on 01788 815017.