Households who receive Child Benefit can incur a High Income Benefit Charge and have the Child Benefit clawed back, where the highest earner has an income in excess of £50,000 (and withdrawn completely at incomes of £60,000 or more). This tax charge was introduced from 7 January 2013.
The Child Benefit charge becomes applicable, when an individual is in receipt of the child benefit and their adjusted net income is over £50,000 in a tax year.
If both partners have adjusted net income over £50,000, the partner with the higher income is liable for the charge (regardless of which partner is in receipt of child benefit).
HMRC have produced a calculator on the GOV.UK website that calculates the tax charge that may have to be paid. https://www.gov.uk/child-benefit-tax-calculator
The charge is collected through the self-assessment system, so that individuals who are liable to pay it are required to file an annual tax return.
The legislation for the ‘high income child benefit charge’ was introduced in the Finance bill 2012 (clause 8 and schedule 1) and is now the Finance Act 2012.
On 3 September the HICBC was the subject of a debate in Westminster Hall, initiated by Craig Mackinlay MP. Concerns were raised about the design of the HICBC, the method of its collection, the growing number of taxpayers liable to pay the charge and the number charged penalties for having failed to register with HMRC as well as potential consequences for parents who decided not to claim child benefit. No solution was finalised and the concerns are ongoing.
The information in this article is believed to be factually correct at the time of writing and publication, but is not intended to constitute advice. No liability is accepted for any loss howsoever arising as a result of the contents of this article. Specific advice should be sought before entering into, or refraining from entering into any transaction.