Are you caught by the High Income Child Benefit tax charge?
The High Income Child Benefit Charge (HICBC) applies to taxpayers whose income exceeds £50,000 in a tax year and who are in receipt of child benefit. The charge either reduces or removes the financial benefit of receiving child benefit. Where both partners have an income that exceeds £50,000, HICBC is payable by the partner with the highest income.
The HICBC is charged at the rate of 1% of the full child benefit award for each £100 of income between £50,000 and £60,000. For taxpayers with income above £60,000, the amount of the charge will equal the amount of child benefit received.
Taxpayers can choose between claiming child benefit and paying the tax charge through self assessment, or elect to stop receiving child benefit and not pay the charge.
If the High Income Child Benefit tax charge applies to you or your partner it is usually worthwhile to continue claiming Child Benefit for your child as this can help to protect your State Pension and will make sure your child receives a National Insurance number.
Taxpayers who continue to receive child benefit (and earn over the relevant limits) must pay any tax owed for 2016-17 on or before 31 January 2018.