“High Income Child Benefit Charge” – Do you think this is a fair tax?

29th October 2013

“High Income Child Benefit Charge” – Do you think this is a fair tax?

Families who receive child benefit where at least one parent earns more than £50,000 a year should have registered for Self-Assessment with HMRC before 5 October 2013 or they could face stiff penalties.

A new tax charge known as the “high income child benefit charge” came into force on 7 January this year. HMRC estimates that more than 500,000 taxpayers who do not normally need to complete a tax return may need to do so for the first time for the tax year 2012-13. This adds considerable complexity to the tax system for people who do not normally prepare tax returns. It will bring many extra taxpayers within the Self-Assessment system who would normally just pay tax on their salaries under PAYE. Not everyone will feel able to complete their own tax returns and so will also have to consider paying an advisor to do this for them.

So who is affected?

The high income child benefit charge affects families where one partner earns more than £50,000. The tax charge works so that there is a partial claw-back of child benefit where the income is between £50,000 and £60,000 and once income reaches £60,000, child benefit is clawed-back in full. We are therefore left with the controversial situation where each partner in the family could earn £50,000 (i.e. £100,000 in total) and there is no high income child benefit charge applied. However, where one partner in the family is the sole-earner, earning £60,000 per year, there is a full claw-back of child benefit. In these circumstances the family with the lower income has the higher tax charge – is this fair?

If you are confident that you will have a full claw-back of the child benefit then you can elect not to receive the child benefit in the first place and you will not then suffer the tax charge or be required to complete a tax return.  However, it remains to be seen how easy it is to reinstate the child benefit if circumstances change, (such as an unexpected redundancy) and therefore, people may decide to keep receiving the benefit knowing that it will have to be repaid via their self assessment tax bills.


For more information please contact Karen Oliver, Tax Manager



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30th Nov 2013

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