A reminder, that if either parent’s income exceeds £50,000 this will affect eligibility for Child Benefits.
A tax charge, known as the ‘High Income Child Benefit Charge’ (HICBC), is payable if a parent has an individual income over £50,000 and:
It doesn’t matter if the child living with you is not your own child.
If the HICBC does apply, the parent with the highest income (if both exceed £50,000) will need to declare the amount of the Child Benefit received on a Self Assessment tax return. The tax charge will then claw back the Child Benefit received at the rate of £1 for every £2 that income exceeds £50,000. This means that if income is more than £60,000 the HICBC will equal Child Benefit received.
If parents can see that one or both incomes will exceed £60,000 they can elect to withdraw their Child Benefit claim in which case, no entry on a tax return would be required.
If income is in, or just over the £50,000 to £60,000 band, paying pension contributions or donations under gift aid can reduce the impact of the HICBC as well as reducing tax.