Child Benefit is a benefit payable to someone responsible for a child under the age of 16, or 20 if they’re in full-time education. There’s no limit to how many children you can claim for.
There are a few things to be aware of which we’ll take a look at in this article.
You can choose not to receive Child Benefit payments, but you should still fill in the claim form because:
- it will help you get National Insurance credits which count towards your State Pension
- it will ensure your child is registered to get a National Insurance number when they’re 16 years old.
The fixed rate amount for Child Benefit is £20.70 per week for the eldest child and £13.70 per week for any additional children (2019/20 tax year figures, these amounts have not changed for past three years).
You may have to pay a tax charge if your (or your partner’s) individual income is over £50,000. It doesn’t matter if the child living with you is not your own child. The tax charge still applies to the highest earner in the household and is payable through your annual Self Assessment return. If you don’t usually send a Self Assessment tax return, you need to register for Self Assessment by 5th October following the end of the tax year you need to pay the tax charge.
Read our article ‘Do I have to complete a Self Assessment tax return?‘ if you’re not sure whether this applies to you.
The tax charge is known as the High Income Child Benefit Charge and is equivalent to 1% of the Child Benefit you receive for every £100 of personal income over £50,000.
This means that when either you or your partner are earning £60,000 or over, your child benefit payments are cancelled out by the additional tax paid.
How does the High-Income Child Benefit Charge work?
Here’s an example for the 2019/20 tax year. The example ignores any other taxable income, benefits and allowances you receive as an individual.
If you have three children, you’d be eligible to receive £48.10 in child benefit payments per week (£2,501 a year). This income is tax-free as long as you and your partner do not earn over £50,000 individually.
If one of you has annual earnings of £55,000, then that individual’s income exceeds the Higher Income Child Benefit Charge threshold by £5,000. A tax charge of 1% is due on every £100 of income over £50,000. This is calculated as follows:
- £5,000/£100 = 50
- 1% of £2,501 (the amount of Child Benefit received) = £25.01
- 50 x £25.01 = £1250.50
So, in this example you’ll pay tax of £1,251 through your annual Self Assessment.
The tax charge is capped at the amount of Child Benefit received. So if you earn over £60,000, you’ll receive a tax charge equal to the amount of Child Benefit paid. In this example the limit of the tax charge is £2,501.
Benefits in kind may push you over the £50,000 mark
You need to be careful that benefits in kind declared on your annual P11D return may affect your adjusted net income, and unexpectedly push you over the £50,000 threshold. We’ve written an article, “What are benefits in kind?”, to help you figure out what you’ll need to be aware of.