High Income Child Benefit Charge

If you or your partner earn over £60,000 annually, you may be subject to the High Income Child Benefit Charge (HICBC). The HICBC is a tax charge that applies if either you or your partner have an individual income exceeding £60,000. The charge applies in the following scenarios:

  • You or your partner receive child benefit.
  • Someone else receives Child Benefit for a child living with you, and they contribute at least equally to the child’s upkeep.

This charge is applicable regardless of whether the child living with you is your biological child or not.

What Counts as Income?

To determine if you need to pay HICBC, you need to calculate your total taxable income before any personal allowances to understand if it surpasses the £60,000 threshold. It includes earnings such as interest from savings and dividends.

Who Pays the Charge?

If both you and your partner earn over £60,000, the responsibility to pay the tax charge falls on the partner with the higher income. The term ‘partner’ here refers to someone you’re married to, in a civil partnership with, or living with as if you were married or partnered.

Your Choices If Over the Threshold

You have two primary choices if your income is over the threshold:

  1. Continue to receive Child Benefit payments and pay the HICBC at the end of each tax year via a tax return.
  2. Opt out of receiving Child Benefit payments to avoid the tax charge.

Opting Out of Child Benefit

If you choose to opt out of receiving Child Benefit, it’s crucial to still fill in the Child Benefit claim form. This allows you to:

  • Earn National Insurance credits, which count towards your State Pension.
  • Ensure your child receives a National Insurance number automatically before they turn 16.

Opting out can be beneficial if you want to avoid the year-end tax charge but still gain other associated benefits.

If You’re Currently Receiving Child Benefit

If you already receive Child Benefit, here are your options:

  • Opt out of receiving payments.
  • Continue receiving payments and prepare a Self-Assessment tax return to settle any HICBC due.

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