fbpx

Child benefit and the High Income Tax Charge HITC

Child Benefit

From a tax point of view if you receive child benefit there’s nothing else to consider, unless you or your husband/wife/partner earns more than £50,000 in a tax year, as you will have to pay some (or all) of the child benefit you received back through what’s called the ‘High Income Tax Charge’ HITC.

High Income Tax Chargee (HITC)

Individuals who receive Child Benefit may have to pay the HITC if their income (or their partner’s) exceeds £50,000.

Between £50,000 and £60,000 you will pay back a proportion of what you’ve received: 1% for every £100 you’ve earned over the £50,000 (we’ve included an example later on).

Anything over £60,000 and you’ll have to pay it all back.

What’s included in income to see if you are above the £50,000

Income includes pretty much anything that you’d be taxed on: Salary, dividends, bonuses, commissions received, tips, rental income and so on.

If this is the case, you are required to show this on your next Self-Assessment tax return and pay the charge that you owe – called the HICBC.

Many families caught by one of the partners earning over the £50,000 threshold simply decide it is easier to not bother claiming child benefit. But the danger with this course of action is that child benefit is linked to certain national insurance entitlements – the claimant can get national insurance credits for periods when they are not working until the child reaches 12 years of age, and claiming child benefit ensures that the child is sent a national insurance number when they are 16. These entitlements are lost if the benefit is not claimed.

The only way to avoid the HICBC completely while retaining national insurance entitlements is to claim child benefit then opt not to receive it:

Tax tip:

Even if you or you partner exceed the £50,000 threshold, you should still claim Child Benefit (but then tick the box to opt out of actually receiving any cash). This ensures you get any National Insurance credits (which accrues towards your state pension) and also helps your children to automatically receive their National Insurance number before their 16th birthday.

Example:

Between 6th April 2019 and 5th April 2020, you receive a salary of £10,000 , dividend income of £30,000 and income from renting out property of £15,000. So total income of £55,000.

You have also been receiving child benefit for the whole of this period amounting to £1,076.40.

The HITC is calculated as 1% for every £100 you earn over the base £50,000. So in this case, being £5,000 over the base, you are 50 lots of £100 over, which is 50×1% = 50%.

Your HITC is therefore 50% x £1,076.40 = £538.

So, you must tick the box in your personal tax return SA100 and include the amount of Child Benefit you have received, and pay the HITC of for the year of £538 by 31st January following the 5th April tax year that it relates to.

Top tip:

Even if you or you partner exceed the £50,000 threshold, you should still claim Child Benefit (but then tick the box to opt out of actually receiving any cash). This ensures you get any National Insurance credits (which accrues towards your state pension) and also helps your children to automatically receive their National Insurance number before their 16th birthday.

Tell your staff

Let your staff and Clients know as well!

Subscribe for Updates

Sent straight to your inbox for free, so you don’t miss any!

* indicates required
  • Categories

  • Recent Posts

  • error: As our pages are continually being updated, we\'ve disallowed copying them for now. Please contact us if you want to use any of our pages of course!