What is the “High Income Child Benefit Charge”?
We’ve posted about the interaction between taxable income and child benefit a lot over the past years since the changes were brought into place.
We thought it would be worth posting about this again, as HMRC are now contacting taxpayers who may be affected by this for the last tax year, ending 5th April 2022. The important point with this is that may affect individuals who wouldn’t otherwise have a reason to complete a tax return each year.
The overview on the High Income Child Benefit Charge provided by HMRC where you may be liable is:
- You or your partner have an individual income that’s over £50,000 and either:
- You or your partner get Child Benefit
- Someone else gets Child Benefit for a child living with you and they contribute at least an equal amount towards the child’s upkeep
*It does not matter if the child living with you is not your own child*
An important point here is what counts as income?
For the purpose of this charge, HMRC calculate the income threshold based on “adjusted net income”. Your adjusted net income is your total taxable income, which will include income such as – employment, benefits in kind, savings interest, dividends, rental profits, pension income. You then adjust this for any allowances such as employment related expenses (use of home as office, mileage rates), gift aid contributions and personal pension contributions.
Our main point here is that, there are items within your control that can directly effect and reduce your adjusted net income, to either reduce the impact of the child benefit charge or remove the need to repay completely – you just need to be assessing these items in year – so it doesn’t come as a shock.
If your adjusted net income still falls above £50k, then you will be liable to repay some or all of the child benefit received in the tax year, it will be repayable in full once your adjusted net income hits £60k. So for example if your adjusted net income is £55k as you are half way between £50k and £60k – half of the child benefit amount you have received would be repayable.
The charge is payable by the individual whose adjusted net income is above £50k, or in the case where both are, the highest earner.
If you are concerned this may affect you or you aren’t aware of the impact that the allowances and reliefs may have on your personal situation – then please get in touch with the team at RiverView Portfolio.
