HIGHER RATE TAXPAYERS: High earners may need to find out how and when to pay a tax charge. Reaching the upper limit might stop you getting the standard rate of Child Benefit.
There may also be circumstances where the child living with you is not your own. The High Income Child Benefit Tax Charge affects those with an individual income of more than £50,000 and either:
- You or your partner receive Child Benefit payments.
- Someone else is getting Child Benefit for a child living with you and they contribute an equal amount (or a higher amount) towards the upkeep of the child.
The high income Child Benefit charge calculator can help you check how being a higher rate taxpayer will affect your payments.
You should still return the Child Benefit claim form even if you choose to stop claiming and ‘opt out‘ of getting the extra payment.
The most important reason for this is that National Insurance credits count towards the UK State Pension.
Note: As a rule, higher rate taxpayers must choose between opting out to stop receiving Child Benefit or continue to get the benefit. This may mean paying any extra tax charge at the end of each tax year.
Adjusted Net Income Threshold
Your adjusted net income gets used to calculate whether your earnings go over the tax threshold. This is your total taxable income before any Personal Allowances, with a few exceptions (e.g. Gift Aid).
Tax Charge: How and When to Pay?
Basically, you (or your partner if their income is higher than yours) are responsible for paying the high income tax charge if that income is more than £50,000.
The term ‘partner‘ refers to a person that you are married to, in a civil partnership with, or living with as though you were. In other words someone who you are not permanently separated from.
You must pay the relevant tax charge by filling in a Self Assessment tax return for every tax year that it applies. There are a few basic steps to complete the process.
- You may need to Register for Self Assessment if you do not already fill in a tax return (to send your tax return).
- Work out the Child Benefit tax charge calculation and complete the tax return declaring (including) the amount of Child Benefit received for the tax year.
- Send your tax return to HM Revenue and Customs (HMRC).
- Pay any tax that you may owe before the deadline.
You should send the tax return and pay before the tax deadlines if you are registered for Self Assessment. This should allow you to settle a tax bill through your PAYE tax code which means the money you owe gets deducted directly from your salary or pension.
Note: You are likely to incur a penalty for missing payment deadlines.
Tax Charge over £50,000
Tax gets charged on the received Child Benefit at a rate of 1% for every £100 that your individual income exceeds £50,000. But, it is never more than the amount of Child Benefit you receive for a tax year.
What if you need information from your partner (or ex-partner) and unable to get it? In this case you can ask HM Revenue and Customs. HMRC will confirm whether your partner receives the benefit or not.
As a rule, they confirm or deny the fact with a ‘yes’ or ‘no’ answer. They should also let you know if your partner has a higher adjusted net income than you. There is an online form for this purpose but no financial information will be given in reply.
Note: This service is only available to you if your income is more than £50,000. It also applies if you and your partner live together or have separated within the tax year for which you want the information.
How to Stop Child Benefit
If you want to stop your Child Benefit you should contact their office by phone, post, or by filling in an online form. Remember that the entitlement to cancel the process rests with the person receiving the benefit, an appointee dealing with the claim, or a registered authorised agent.
Note: Stopping Child Benefit is not allowed if it is being used to pay back an overpayment (or certain other benefits from another country).
Your Responsibilities After it Stops
You must pay any due taxes up to the date when your Child Benefit stops and report any changes in your family life that might affect your legitimate entitlement to receive Child Benefit.
How to Restart Child Benefit
Restarting Child Benefit is easy to do providing you still qualify for the payment and you are the person who stopped it (or an appointee). Initiate the restart by filling out an online form or you can contact the Child Benefit Office by post or telephone.
The Child Benefit Office will write to you confirming if there is any backdated money and how much is due. As a rule, payment begins again from the first Monday after your request is received.
Your Responsibilities After it Restarts
Do not fail to report any changes to your family life affecting your Child Benefit, and you (or your partner) must pay any tax charge from the restart date (if your income is over £50,000).
If Your Circumstances or Income Change
Providing your income is below £50,000 for the whole tax year, you remain under the High Income Tax Charge and do not need to pay it.
Even so, you can decide whether to stop or restart your Child Benefit at any time, and especially if your circumstances change or your income goes over the tax threshold.
Having Another Child
When you claim Child Benefit it helps you qualify for National Insurance credits (which protect your State Pension rights). It also helps claims for other benefits such as the special Guardianship Allowance.
Claiming the benefit proves you (or your partner) support another child but you could pay less child maintenance for children who are not living with you.
If you make a new claim or choose to protect your entitlement, you should tick the option ‘not have the benefit paid’ when you send in a Child Benefit claim form.
High Income Child Benefit Charge Separation
While your income is £50,000 or more, your circumstances change if you move in with, or split up from, someone who is already receiving Child Benefit.
This means, if your earnings are higher than the income of your new partner, you may be responsible for paying the extra charge for higher rate taxpayers. Your partner must pay it if their income is higher than the threshold and your income.
Tax charges apply from the date you move in together and only end if you separate permanently, or Child Benefit stops. Perhaps the most likely reason is when the child turns 16 years old and becomes too old to qualify.
Note: Partners who have a short period apart do not usually count as a permanent separation. Typical examples include working away from home or for a short stay in hospital.