Personal taxation: Child benefit explained – are you liable for the charge?
In this article we explain the high income benefit charge that was introduced in 2013 as a means of restricting child benefit to couples.
This charge effectively claws back through the self-assessment tax return of the higher earning partner, some or all of the child benefit received in the year. Consequently as an alternative to incurring the charge, HMRC allows individuals not to receive the benefit.
It is important to note that the tax charge does not just apply to married couples. If two individuals are living together as husband and wife, or civil partners, and both:
- either of them receive child benefit and
- either has adjusted net income (ADI) of more than £50,000
(this is income less the gross amount of any personal pensions and gift aid donations)
then the higher earner will be liable to the higher income child benefit charge.
In addition where:
- Married couples separate the charge will also continue to apply until such time as the separation becomes permanent; and
- If a child is being cared for by someone other than the parents, for example a grandparent, on a long term basis, the carer may be liable to a tax charge.
Calculating the tax charge
The tax charge is 1% of the child benefit received for every £100 of ADI over £50,000. This has effectively introduced several hundreds of thousands of tax payers to having to file tax returns.
If your ADI exceeds £60,000 the tax charge will effectively claw back all the child benefit.
Do remember that you don’t need to be the recipient of the child benefit to be the one that is taxed.
Charterhouse is a dynamic and determined accountancy practice located in Harrow and Beaconsfield. Charterhouse writes blog articles to help share expert advice on all aspects of accountancy, including personal taxation and corporate tax management.