Child Benefit

Since January 2013 some households have been caught by the High Income Child Benefit Charge (HICBC). The charge works as a percentage and is simply calculated as any income received by an individual that is above £50,000 will result in paying a charge of 1% of the Child Benefit received for every £100 of income above that £50,000 base level. This charge is irrespective of whether the individual who receives the child benefit is the person earning the high income. So if your income is £57,000 your tax charge equals 70% of the Child Benefit received.

What counts as income?

The income considered is "adjusted net income" and includes all taxable income for the tax year in question, therefore salary, taxable benefits-in-kind such as a company car, (Net) rental income, and gross-interest will all count. However, there are deductions that are allowable in calculating the relevant "net" income, such as pension contributions or payments to charities.

Pension Contributions and Saving Child Benefit

Therefore in the above scenario a £57,000 salary could retain the child benefit by making a £7,000 pension contribution. BY including the tax relief received, the contribution would, in Net terms, cost only £3,454. Further guidance can be sought by visiting: https://www.gov.uk/child-benefit-tax-charge  

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