Child Benefit tax rules explained – payment isn’t taxable but charge may still apply

Martin Lewis explains who is eligible for Child Benefit

January is a time in which many people will be planning their finances for the year ahead. It’s also the month in which those who need to file a Self-Assessment Tax Return must ensure they have done so, with the deadline falling at the end of the month.

Child Benefit is not a form of taxable income, meaning Income Tax does not need to be paid on it.

That said, a tax charge may still apply for some.

The tax for this particular state benefit is income-based.

It’s known as the High Income Child Benefit Tax Charge (HICBC).

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It may be a person needs to pay the tax charge, depending on what their individual income is.

The government explains this is if they “have an individual income of over £50,000 and either:

  • You or your partner get Child Benefit
  • Someone else gets Child Benefit for a child living with you and they contribute at least an equal amount towards the child’s upkeep.”

It doesn’t matter whether the child the person lives with is their child or not – they would still be liable to pay the charge.

It’s possible to use the Child Benefit tax calculator, which is on the government website, to see if the tax will need to be paid.

This tool will also enable a person to get an estimate of their adjusted net income.

Should two people in a couple have an individual income of more than £50,000, then whoever has the higher income would be responsible for paying the tax charge.

People who need to pay the tax charge will need to register for Self Assessment, and then fill in a Self Assessment tax return each tax year and pay what they owe.

The tax charge is something which Kay Ingram, Director of Public Policy at LEBC Group, has shared several warnings on.

Speaking to, Ms Ingram said: “For most parents this is a tax-free benefit.

“However, if one adult in the household has income of more than £50,099 tax is payable on the benefit at a rate of one percent for each £100 of income over £50,000 so that once the income reaches £60,000 the whole benefit is taxable.”

The chartered financial planner went on to explain there are a number of options for those affected by the charge.

“Parents with income substantially above £60,000 may choose to waive payment of the Child Benefit to avoid having to report and pay the tax,” she pointed out.

Meanwhile, people who can still receive some Child Benefit despite being hit by the tax also have avenues they could consider.

Ms Ingram said: “Those whose incomes are above £50,099, but below £60,000, can still receive a proportion of the benefit tax free and can even increase their entitlement to tax free Child Benefit by making pension savings or donating to charity.

“Each £1 saved in a pension plan or gifted using gift aid reduces the income that counts towards the threshold in addition to providing tax relief at 40 percent.”

However, with the Self Assessment Tax Return deadline just months away, those who haven’t yet acted may now only be able to pursue this option for the current tax year and beyond.

“It is too late now for parents to make a pension contribution or gift aid donation to be offset against tax due for 2019-20 and this must be paid by 31 January 2021 but saving into a pension between now and 5 April 2021 will restore the tax free benefit for the current tax year,” she said.

“This may enable those who have waived Child Benefit so far to reclaim it.”

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