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Child Benefit charge

The receipt of Child Ben­e­fit can result in a tax bill. This poten­tial bill brings the Child Ben­e­fit into the scope of self assess­ment and, if you live in the Lanark­shire area we, at Rus­sell & Rus­sell, can advise you on the poten­tial appli­ca­tion of the Child Ben­e­fit Charge and pos­si­ble tax plan­ning that may be appro­pri­ate to remove the Child Ben­e­fit Charge.

The High Income Child Ben­e­fit Charge is a charge paid by a tax­pay­er who has income over £60,000 in a tax year and either they or their part­ner have received Child Ben­e­fit for the year.

We set out below the main points of the charge and illus­trate some of the prac­ti­cal issues.

Does this affect my family?

The High Income Child Ben­e­fit Charge is payable by a tax­pay­er who has ‘adjust­ed net income’ (explained lat­er) in excess of £60,000 where either they or their part­ner, if they have one, are in receipt of Child Ben­e­fit. Where there is a part­ner and both part­ners have adjust­ed net income in excess of £60,000 the charge applies to the part­ner with the high­er income.

Note that part­ner does not just include spous­es or civ­il part­ners but also any­one you live with as if you were spouses/civil part­ners.

Practical issues

Some cou­ples with fluc­tu­at­ing income lev­els may find that they are caught by the charge or per­haps that the part­ner who usu­al­ly has the high­er income does not actu­al­ly end up pay­ing the charge as the fol­low­ing exam­ple illus­trates.

Example

Nico­la, who receives Child Ben­e­fit, is employed as a teacher and earns £64,000 a year. Her hus­band Alan is a self-employed solic­i­tor and his account­ing year end is 31 March. He is late in sub­mit­ting his books and records to his accoun­tant for the year end­ed 31 March 2026. His results for that year will form his tax­able prof­it for 2025/26. Nico­la and Alan do not have any oth­er income oth­er than their earned income but his prof­its are gen­er­al­ly in excess of £70,000. On this basis Nico­la assumes that Alan will be liable for the charge.

In Jan­u­ary 2027 Alan’s accoun­tant com­pletes his tax return, files this in advance of the 31 Jan­u­ary dead­line and advis­es that his prof­it has reduced to £48,000 as he had expe­ri­enced a num­ber of bad debts.

As a result Nico­la has the high­er income for 2025/26 and is there­fore respon­si­ble for pay­ing the charge by 31 Jan­u­ary 2027 and she will need to con­tact HMRC about this.

For cou­ples who do not share their finan­cial details there is a prob­lem as it is dif­fi­cult to accu­rate­ly com­plete their tax return (or know if they need to con­tact HMRC to request one) if their own income is over £60,000 and Child Ben­e­fit is being claimed. Only the high­er earn­ing part­ner is liable so this needs to be deter­mined.

Changes in circumstances

As the charge is by ref­er­ence to weeks, the charge will only apply to those weeks of the tax year for which the part­ner­ship exists. If a cou­ple breaks up, the part­ner with the high­er income will only be liable for the peri­od from 6 April to the week in which the break up occurs.

Con­verse­ly, if a cou­ple comes togeth­er and Child Ben­e­fit is already being paid, the part­ner with the high­er income will only be liable to the charge for those weeks from the date the cou­ple start liv­ing togeth­er until the end of the tax year.

So what is the adjusted net income of £60,000 made up of?

It can be seen that the rules revolve around ‘adjust­ed net income’, which is broad­ly:

  • net income (total income sub­ject to Income Tax before any Per­son­al Allowances less spec­i­fied tax reliefs e.g. trad­ing loss­es and pay­ments made gross to pen­sion schemes)
  • reduced by grossed up Gift Aid dona­tions to char­i­ty and per­son­al pen­sion con­tri­bu­tions which have received tax relief at source.

In some cas­es it may be that an indi­vid­ual may want to donate more to char­i­ty or make addi­tion­al pen­sion con­tri­bu­tions: for exam­ple, to reduce or avoid the charge.

Inequity applies as house­hold income is not tak­en into account.

There­fore, equal­is­ing income for those who have the flex­i­bil­i­ty to do so such as in fam­i­ly part­ner­ships or fam­i­ly own­er man­aged busi­ness­es may be impor­tant.

The charge

An Income Tax charge will apply at a rate of 1% of the full Child Ben­e­fit award for each £200 of income between £60,000 and £80,000. The charge on tax­pay­ers with income above £80,000 will be equal to the amount of Child Ben­e­fit paid.

Example for 2026/27

The Child Ben­e­fit for two chil­dren amounts to £2,337.40 per annum. The tax­pay­er’s adjust­ed net income is £70,000. The Income Tax charge will be £1,168.00. This is cal­cu­lat­ed as £2,337.40 x 50% (£70,000 — £60,000 = £10,000/£200 x 1%) round­ed down to the near­est pound.

How does the administration operate?

The High Income Child Ben­e­fit Charge should be paid through the self assess­ment sys­tem if either an indi­vid­ual is required to sub­mit a tax return for anoth­er rea­son (such as a lia­bil­i­ty to Income Tax or Cap­i­tal Gains Tax (CGT)) or it is lat­er than 31 Jan­u­ary in the year after the tax year in which it needs to be paid for.

Oth­er­wise, the charge is includ­ed in Pay as You Earn (PAYE) reg­u­la­tions so that it can be col­lect­ed through PAYE, using a reduced tax code. It is also includ­ed in the def­i­n­i­tion of tax lia­bil­i­ty, so that it could poten­tial­ly affect pay­ments on account and bal­anc­ing pay­ments.

So should you continue to claim Child Benefit?

It is impor­tant to appre­ci­ate that Child Ben­e­fit itself is not liable to tax and the amount that can be claimed is there­fore unaf­fect­ed by the charge. It can there­fore con­tin­ue to be paid in full to the claimant even if they or their part­ner have a lia­bil­i­ty to the charge.

On the oth­er hand Child Ben­e­fit claimants are able to elect not to receive the Child Ben­e­fit to which they are enti­tled if they or their part­ner do not wish to pay the charge. This will not affect the cred­it avail­able (for state pen­sion pur­pos­es) to cer­tain peo­ple who stay at home to look after chil­dren (pro­vid­ed that an ini­tial claim for child ben­e­fit was made when the child was born).

An elec­tion can be revoked if a per­son­’s cir­cum­stances change.

Guidance

HMRC have issued some guid­ance on the charge and the options avail­able which can be found here. This should be essen­tial read­ing for many fam­i­lies.

How we can help

If you live in the Lanark­shire area and you are unsure about any­thing to do with the Child Ben­e­fit charge or would like to dis­cuss the mat­ter fur­ther includ­ing how we might be able to min­imise the tax charge which may apply to your fam­i­ly, please do not hes­i­tate to con­tact us at Rus­sell & Rus­sell.