If you receive Child Benefits and you or your partner (or both) receive over £50,000 per annum of ‘Adjusted Net Income’ (ANI), then this is important for you to know.
HMRC have contacted us to let us know that nationwide many individuals are not completing their Self-Assessment tax returns correctly, particularly in reference to those who have claimed Child Benefits.
You may not be aware of this, but depending on your income you may not have been eligible for the full benefit that you have been paid. It is really important if you receive Child Benefits to tell your Tax Advisor or accountant, or complete the self-assessment form correctly, if you complete this yourself, by declaring the correct benefit that you have received.
Who is eligible to receive Child Benefit?
Child benefit usually ceases on 31 August on or after the child’s 16th birthday unless the child remains in full time education. In this instance, the child benefit will stop when the child reaches the age of 20 even when they are in a full time education.
How is the Child Benefit I receive calculated?
Child Benefit are tax-free payments that UK individuals can claim for their children (or children in their care). It is paid every 4 weeks directly to the parents nominated bank account. This benefit can be claimed by anyone who qualifies (regardless of their income and savings) but the benefit you are eligible for depends on how many children you are claiming for (see below)
- £21.15 a week for the eldest (or only) child, plus
- £14.00 a week for every other eligible child
What is the ‘High Income Child Benefit Charge’?
The ‘High Income Child Benefit Charge’ (HICBC) claws back the benefit received if you or your partner receive an ‘adjusted net income’ (ANI) in excess of £50,000. If your or your partner’s ANI exceeds £60,000 you will need to repay 100% of the benefit you have claimed.
How do I calculate my ‘Adjusted Net Income’ (ANI)?
| Taxable Income |
X |
| Less, | |
| Grossed up Personal Pension Contributions (PCC X 20/80) |
(X) |
| Grossed up Gift Aid Donations (GAD X 20/80) |
(X) |
| Adjusted Net Income |
(X) |
How is the Charge Calculated?
The charge is 1% of the benefit received for every £100 of ANI that exceeds £50,000. The percentage is rounded down to the nearest whole number. Therefore, once yours or your partners ANI is in excess of £60,000 you must repay the full benefit that you and/or your partner has received. The HICBC that you will need to pay back completely depends on your income, however the break down below shows the % you would need to pay back for ever £1,000 earned over £50,000.
| ANI Received | High Income Child Benefit Charge (%) | ANI Received | High Income Child Benefit Charge (%) |
| £50,000 | 0% | £56,000 | 60% |
| £51,000 | 10% | £57,000 | 70% |
| £52,000 | 20% | £58,000 | 80% |
| £53,000 | 30% | £59,000 | 90% |
| £54,000 | 40% | £60,000 | 100% |
| £55,000 | 50% |
The unfairness of the HICBC
The HICBC was implemented so that families with lower income receive more support than those with higher income. As many of you will already know, the calculations for HICBC could be deemed as ‘unfair’. The table below demonstrates this argument:
| ANI of Parent 1 | ANI of Parent 2 | Total Income | % Clawed Back | Notes |
| £99,000 | £0
(unemployed) |
£99,000 | 100% | Parent 1’s ANI >£60,000, Lose all benefit |
| £49,500 | £49,500 | £99,000 | 0% | Neither parent’s ANI is >£50,000, Keep full benefit |
| £60,000 | N/A
(Single Parent) |
£60,000 | 100% | Single parent’s ANI =£60,000, Lose all benefit |
How can I be more Tax Efficient?
For those of you who earn more than £50,000 and claim Child Benefits there are ways for you to potentially reduce your ANI meaning you could potentially keep the full benefits that you or your partner have claimed. The following examples could be beneficial to you, however a Tax Advisor would be able to tailor advice to your personal situation.
- Making larger contributions into your personal pension (max contribution per year is £40,000),
- Consider /making larger Gift Aid donations,
- Utilising a work place Salary Sacrifice scheme (if they have one) and sacrifice some of your salary to your work place pension, or other exempt benefits
Importance of Reporting this Benefit
If you do not submit the correct information to HMRC on your Tax Return, HMRC will apply an ‘inaccuracy penalty’ in addition to charging a margin of interest on the additional tax that you have not paid.
If you would like to talk to one of our team about this, please call our Carlisle Head Office on (01228) 534 371 and we will arrange for a Tax Advisor to discuss this with you.
