Child benefit: high income charge

The child benefit charge on ‘high income’ families is now part of our legislation. It appears as Schedule 1 to the Finance Act 2012. It comes into effect for 2012/13, but only applies from 7 January, 2013. A taxpayer (T) is liable to the charge if either T or T’s partner has adjusted net income (ANI) in excess of £50,000 and either is entitled to child benefit.

The charge is the ‘appropriate percentage’ of the total child benefit received by both in the fiscal year. Where the adjusted net income is £60,000, the appropriate percentage is 100%.

Taxpayers are partners if:

  • they are married to each other or are civil partners and are not separated under a court order or in circumstances where the separation is likely to be permanent; or
  • they are living together.

As the charge is by reference to weeks, it will apply only to those weeks of a fiscal year for which a partnership exists. If the partnerships beaks up, the higher income partner will only be liable from 6 April until the week the partnership breaks up.

If child benefit is being paid, and a couple start living together, the charge will arise from the time the couple live together.

There is an exemption if one partner had previously claimed child benefit in the basis that they were living with the child and after a period of less than 52 weeks, resumed the claim on the same basis. This would occur when a parent moves away temporarily for work purposes and leaves the child with a family member until they return.

Adjusted net income is income net of deductions such as pension contributions, gift aid, trading losses, etc.

The formula in the Finance Act 2012 schedule 1, chapter 8, section 381c states:

The amount of the charge

(1) The amount of the high income child benefit charge to which a person (“P”) is liable for a tax year is the appropriate percentage of the total of—

(a) any amounts in relation to which condition A is met, and

(b) any amounts in relation to which condition B is met.

For conditions A and B, see section 681B.

(2) “The appropriate percentage” is—

(a) 100%, or

(b) if less, the percentage determined by the formula—

ANI - L%


  • ANI is P’s adjusted net income for the tax year;
  • L is £50,000;

(3) If—

(a) the total of the amounts mentioned in paragraphs (a) and (b) of subsection (1), or the amount of the charge determined under that subsection, is not a whole number of pounds, or

(b) the percentage determined under subsection (2)(b) is not a whole number,

it is to be rounded down to the nearest whole number.




Vicky and Andy are married, with three sons. Vicky receives child benefit for Ashley (£20.30), Daniel and Josh (£13.40 each). From 7 January to April, she receives (20.30 x 13) =£263 + (£13.4 x 2 x 13) = £348, total £611.

Andy earns £55,000 and Vicky earns £5,000.

Percentage charge: £55,000 - £50,000% = 50%

Andy is liable to a charge of 50% x £610 (after rounding down).

Andy would face a charge of £305.

One of the major problems with this is the requirement for both partners to disclose their income. This caused a lot of difficulties prior to the introduction of separate assessment in 1990/91.

Another potential problem arises from the election not to receive child benefit. If a partner’s income is in excess of £60,000, it may be preferable to disclaim the benefit in order to avoid the charge. If the claimant decides to elect not to receive the benefit because the expected income is over £60,000 and the higher income partner finds that this is not the case, the claimant can revoke the election.


The practicalities

Child benefit should be claimed, normally when a child is born. This provides the entitlement to child benefit. Making the claim, even if the parents plan to elect not to receive the payments, is important if the parent wishes to obtain the National Insurance credits for state pension entitlement. It also guarantees that the child will be issued with a National Insurance number once they reach the age of around 15.

New claimants will be told about the new high income child benefit charge when they make their claim, to enable then to decide whether to make an election not to receive the child benefit and avoid the charge.

Existing claimants and their partners are not so easy to identify. HMRC needs to get in touch with everyone who may be in the over £50,000 income bracket and either be a claimant or in a relationship with a claimant.

Child benefit itself is not liable to tax and the amount that can be claimed is unaffected by the new charge.