The High Income Child Benefit Charge (HICBC) applies to individuals in the UK with an income over £50,000 who receive Child Benefit or whose partner receives it.
Here are the key points:
Threshold: If you or your partner have an individual income exceeding £60,000, you may be subject to the HICBC.
Adjusted Net Income: To determine eligibility, calculate your ‘adjusted net income,’ which includes total taxable income (excluding allowances and Gift Aid) and interest from savings and dividends.
Tax Charge Responsibility: If both you and your partner exceed the threshold, the higher earner is responsible for paying the tax charge.
Options:
Receive Child Benefit Payments: You can receive Child Benefit payments and pay the tax charge at the end of each tax year.
Opt Out: Alternatively, you can opt out of receiving payments altogether and avoid the tax charge.
Tapered Charge: If your income falls between £60,000 and £80,000, the charge is 1% of Child Benefit for every £200 of income exceeding £60,000. Beyond £80,000, the charge equals the Child Benefit payment.
Example: Suppose you earn £65,000 annually and receive Child Benefit for two children. Your adjusted net income exceeds the threshold (£60,000). The charge would be calculated as follows:
Excess income: £65,000 - £60,000 = £5,000
Charge: 1% of £5,000 = £50
You’d pay £50 for the Child Benefit received during the tax year.
If you are in any doubt, get in touch with us today.
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