Do you claim child benefit? Then you may need to file a self-assessment.

With a little over a month to go until the online tax return deadline, HMRC are introducing ‘the high income child benefit charge (HICBC). From 7th January onwards, taxpayers with an income greater than £50,000 who also claim child benefit will need to decide whether to stop receiving these benefits, or pay a charge via self-assessment. SimpleTax is here to explain the basics:

Update: Quickly check how much Child Benefit changes will cost you, if anything, with the SimpleTax Child Benefits Calculator.

Who is affected by HICBC?

Unfortunately, you will be affected by HICBC if any of the following scenarios apply to you:

  • Your individual income is greater than £50,000 and you claim child benefit.
  • Your individual income is greater than £50,000 and your partner is entitled to receive child benefit.
  • Both you and your partner have an income of greater than £50,000 and one of you is entitled to receive child benefit.

Even if the child is not your own, if someone in your household claims child benefit and you have an individual income greater than £50,000, then HICBC affects you.

What to do if HICBC does affects you

If you are one of the unlucky taxpayers affected by HICBC, then you have two options:

  1. You can choose to keep claiming child benefits – if this is the case, then you MUST declare the amount of child benefit you receive by filing a self-assessment tax return.
  2. Alternatively, you can choose to opt out of child benefit payments and you will not be required to file a self-assessment (unless you need to for other sources of income). To opt out, you must contact HMRC before 7th January.

If you decide to keep claiming child benefit payments, HMRC will start taxing you from 7th January. But let’s find out how much this is going to cost you.

How does the tax charge work?

How much you pay depends on two things:

  1. The amount of child benefit you receive.
  2. Your ‘net’ income.

However, the amount of tax you pay can differ considerably, depending on which category you fall into. The two categories are:

  1. Income between £50,000 – £60,000: the tax charge will be 1% of the child benefit for every £100 of income which falls between £50,000 – £60,000.
  2. Income over £60,000: If you fall into this category, the tax charge is 100% of the child benefit you receive.

Whichever option you choose, you must contact HMRC before 7th January, or HMRC will charge you anyway.

Of course, SimpleTax is always here to answer any of your tax-related questions. If you’re sick to death with HMRC, we can help you to file your tax return without dealing with cryptic HMRC forms.

And if you’ve never had to file a tax return before we can help you get your Unique Taxpayer Reference (UTR) number so you’re all ready to file online before January 31st.


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