High Income Child Benefit
This vlog provides an overview of High Income Child Benefit and is relevant to anyone who received Child Benefit.
If either you or your partner has an income of more than £50,000 a year before tax then you will have to pay back some (or all) of your Child Benefit in the form of extra Income Tax.
There are various scenarios to cover depending on where you and / or your partner:-
- Both earn less than £50,000 per year
- Earn between £50,000 and £60,000 per year
- Earn more than £60,000 per year
You and your partner both earn less than £50,000 per year
If you and your partner both earn less than £50,000 per year then you will receive the full amount of Child Benefit without having to pay any of it back.
You or your partner earn between £50,000 and £60,000 per year
If either you or your partner earns between £50,000 and £60,000 per year before tax, you will have to pay a portion of your Child Benefit back in extra Income Tax.
You will still get paid the full amount of Child Benefit each month (or each week). However, whichever one of you has the higher income will have to pay more Income Tax to repay the portion of Child Benefit you are no longer entitled to.
You will need to fill in a Self Assessment tax return so that HM Revenue & Customs (HMRC) can calculate the amount of extra Income Tax you will have to pay.
How much do you have to pay back if you fall into the category of High Income Child Benefit?
You will be required to pay back 1% of your family’s Child Benefit for every extra £100 you earn over £50,000 each year.
As an example:
- Susan and Bill have a baby. Susan is staying at home to look after the baby. Bill earns £51,000 a year.
- Since Bill earns more than £50,000, he has to pay extra income tax to repay some of their Child Benefit.
- His income is £1,000 (10 x £100) over the limit. Therefore the extra tax is 10% of their Child Benefit of £20.70 per week.
- Therefore, he pays extra tax of £107.64 a year (£2.07 x 52).
You or your partner earn more than £60,000 per year
If either you or your partner has an income of more than £60,000 a year before tax, you will have to repay all of your Child Benefit as Income Tax.
You will still get paid the full amount of Child Benefit each month (or each week). However, whichever one of you has the higher income, will have to pay back the full amount in the form of Income Tax.
You will need to fill in a Self-Assessment tax return so that HM Revenue & Customs (HMRC) can calculate the extra Income Tax you will have to pay.
What to do you need to do if you are a new parent?
By making sure you still put in your claim for Child Benefit. Even if you are earning over £50,000 per year and you have decided not to take the payments — you ensure that you do not miss out on:
- National Insurance credits that protect your entitlement to State Pension
- Your child being automatically issued with a National Insurance number before their 16th birthday
- Other benefits, such as Guardian’s Allowance
If you want your Child Benefit payments to stop
You can choose not to receive your Child Benefit payments any more.
- This avoids the hassle of paying additional tax.
- You will not have to complete a tax return.
- If your annual income is between £50,000 and £60,000, you will end up out of pocket. This is because you will be giving up the proportion of Child Benefit that you are still entitled to.
If you want to continue getting your Child Benefit
You can choose to keep your Child Benefit payments.
- If your income is between £50,000 and £60,000, you will still receive however much you are entitled to.
- Even if you are earning over £60,000, if you put your Child Benefit aside in a savings account, you can earn interest on the money before you have to pay your tax bill.
- You will need to pay the extra tax.
- You’ll have to complete a tax return.
For further information about High Income Child Benefit, please contact Stallion Accountancy Services.