What is Child Benefit?
Child benefit is payable to parents with children under 16, or children under 20 if they remain in approved education or training. The benefit is paid every 4 weeks and the amount the household will receive is as follows:
- Eldest (or only) child – £21.05 per week
- Subsequent children – £13.95 per week (per child)
High Income Child Benefit Charge Explained
The High Income Child Benefit Charge is a tax charge paid by high earners. The charge becomes payable if you or your partner brings home an income of over £50,000 per annum. The tax charge is calculated as one percent of the Child Benefit for every £100 that an individual earns above £50,000. So for example, if you earned £51,000, you would lose 10% of your entitlement to child benefit.
The child benefit is therefore effectively lost altogether when an individual within the household earns over £60,000.
How do I pay this charge if I’m affected?
There are two choices available to those who are affected by the High Income Child Benefit Charge:
- Cancel the benefit, so that you stop receiving Child Benefit
- Declare your income via self-assessment tax return, and pay back the Child Benefit (in part or in full) each
Although the simplest option for many parents affected by the tax charge is option 1, there can be some downsides of selecting this option, for example if you would still have a partial entitlement to the Child Benefit, if your income falls, or as explained further into the article, if your spouse is a low earner or doesn’t work outside the home.
What if my income has fallen due to Coronavirus?
Thousands of people across the UK have seen their income fall either temporarily or permanently as a result of the Coronavirus pandemic. This might be because you have been furloughed and subject to reduced pay, have taken a pay cut or lost your job. This may even be due to you no longer expecting commission, overtime or bonus payments that might add to your earnings in a ‘normal’ year. If you have been affected you may now be entitled to claim Child Benefit free of any High Income Child Benefit Charge. If you were not claiming Child Benefit due to your high earnings, it is advisable to begin or resume claiming if your earnings have dropped below £60,000:
- If the highest earner in the household now has income between £50,000 and £60,000, you are eligible for Child Benefit, a portion of which will be liable to the High Income Child Benefit Charge and need to be paid back in extra income
- If the highest earner in the household now has income below £50,000, you are eligible for Child Benefit free of any High Income Child Benefit
Should I register for Child Benefit even if I’m earning over £60,000?
It is important that even if you or someone within your household earns above £60,000, you still register for Child Benefit. Why?
- You will receive National Insurance Credits which count towards your State Pension. This is of particular importance if one person in the household is not working, for example if you or your partner are taking time off work to look after a child. If you were not registered for Child Benefit, you would not be receiving National Insurance Credits which may in turn, affect your eligibility for the full New State
- Your child will automatically receive a National Insurance number shortly before they turn 16.
- You could miss out on other benefits such as Guardian’s Allowance if you are not registered for Child
If either of you earns over £60,000, you can always register for Child Benefit but opt out of receiving payments, meaning that you will avoid the hassle of the additional tax charge.
It is important to note that it is only the person registered to receive the Child Benefit that would receive the tax credit. Therefore the non-working partner or low earner should be the one registered even though the responsibility for paying any tax charge due would fall on the higher earner.