The High Income Child Benefit Charge (HICBC) – how does it work?

The government does not grant families full child benefit entitlement when one parent earns £60,000 or more. How does this tax work, how do you pay it, and why is it so controversial?

What is the High Income Child Benefit Charge (HICBC)?

One of the more controversial announcements made during Budget 2012 was the radical overhaul of the Child Benefit rules. For the first time since 1946, the benefit ceased being universal.

Currently (during the 2024/25 tax year), the Government pays £25.60 per week to a parent for their eldest child and an additional £16.95 each for any other children.

The High Income Child Benefit Charge came into force in 2013.

In April 2024, the starting threshold was increased from £50,000 to £60,000, and the upper threshold was also increased from £60,000 to £80,000. This change is reflected below.

This charge reduces the benefit (worth nearly £2,212 per year if you have two children) on a sliding scale if one parent earns between £60,000 and £80,000.

The tax charge amounts to 1% of the Benefit received for every £200 one partner earns over £60,000

So, if one parent earns £80,000 or more, then the policy removes the family’s entire child benefit.

How many people does the policy affect?

In the 2020-21 tax year, over 350,000 individuals paid the HICBC, raising over £400m in tax receipts. According to the Guardian, another 600,000+ individuals opted out of receiving child benefits altogether.

Why is the HICBC so controversial?

Many have criticised the change over the past decade, due to several anomalies in the way the policy works in practice.

The financial inequality has reduced following the April 2024 threshold changes, but the fundamental problems remain.

If a family has two parents each earning £59,000 per year (£108,000 in total), the Charge does not affect them at all.

However, if a family has one earner bringing in £60,000, the benefit is removed on a tapered basis. If the individual earns £80,000 annually, the family loses the benefit entirely.

Another unfortunate result is that the Charge forces hundreds of thousands of taxpayers to register for self-assessment to repay any Child Benefit income they no longer have the right to receive.

The rules also appear rather complicated, particularly if a child’s parents have split up. For example, which parent will claim the benefit, and will one parent always know what the other earns?

The Charge only affects the relatively well-off, which could explain the minimal public outcry about its unfairness.

How does HMRC calculate the HICBC?

HMRC calculates the Charge using your ‘adjusted net income’. This includes interest on savings, dividends and any other income. Any allowances (such as pension contributions and Gift Aid) are taken into account.

Use the government’s Child Benefit calculator to work out your adjusted net income.

What you should do if the Charge affects you

You have two choices if the Charge affects you and your family.

1. Voluntarily de-register for Child Benefit – as two-thirds of those affected have already done.
2. Pay any additional tax you owe for the previous tax year via Self Assessment.

The partner with the highest income is responsible for re-paying any Child Benefit received. If both partners earn over £60,000, then the one with the highest income above the threshold should account for the charge.

If you’re a limited company contractor, you already calculate your tax liability via Self-Assessment.

You need to declare the total amount of Child Benefit you received during each tax year.

HMRC will adjust your tax bill according to the level of Benefit you receive.

However, if you’re contracting via an umbrella company, and don’t usually fill in a Self Assessment form, you should register here.

Is HICBC simplification on the cards?

In July 2023, the Conservative government stated its intention to simplify the way the Charge is collected, according to a written statement:

The government will provide details in due course on how it will enable employed customers to pay through their tax code, without the need to register for Self Assessment.

The Labour government has since said it will change the system to allow employees to pay the Charge automatically via their tax code from 2025 – without needing to file a tax return.

A consultation will also be launched on government plans to administer the Charge on a household basis rather than an individual basis from April 2026.

Further Information

Find out if you are liable to pay the High Income Child Benefit Charge. Use this Government tax calculator, alongside some easy-to-digest guides to the Child Benefit tax rules.

For more information on registering for self-assessment, visit this HMRC page.

There are several ways to mitigate against losing your Child Benefit entitlement, such as splitting company income with your spouse or investing more in a pension. So make sure you discuss your tax situation with your accountant.