When a person earns more than £50,000 a year and either they or their spouse collected child benefit during the tax year, or someone else earned child benefit for a kid living with them, the “High Income Child Benefit Charge” kicks in.

When both couples’ combined income exceeds £50,000, the fee is placed on the higher earner; if their incomes are equal, the fee is paid by the one who gets child benefit.

1% of child benefit for every £100 of ‘adjusted net income’ beyond £50,000 is taken.

Taxes on child benefit are equal to 100% of the tax year’s total adjusted net income if you earn more than £60,000. For these reasons, “adjusted net income” refers to income that has been reduced by any Gift Aid payments, pension contributions, and trade losses incurred by self-employed individuals.

Before completing the appropriate portion of the tax return by 31 January, you may choose whether or not to take advantage of this benefit if your income is over a certain amount. Not claiming the charge may appear preferable to having to pay back the whole amount of the child benefit if the charge is equivalent to that amount.

However, many will still claim the child benefit as if it is received for a child under the age of 12, it comes with National Insurance credits, which helps to establish entitlement to the state pension.

As a result, overlooking to file a claim may have an impact on your state pension if you did not otherwise pay enough NIC credits for the year in question.

 

Get in touch with our team of experts at enquiries@aitaccountants.co.uk today for help and advice on tax matters.