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High Income Child Benefit Charge – not just for higher rate taxpayers

The High Income Child Benefit Charge (HICBC) is a tax charge that claws back payments of child benefit where the recipient or the recipient’s partner has income of at least £50,000 per year. Where both the recipient and their partner have income of this level, the charge is levied on the one with the higher income. The scope of the charge may mean that it falls on someone who did not receive the benefit and who is not a biological or adoptive parent of the child/children in respect of which the benefit was paid.

For 2022/23, child benefit is payable at the rate of £21.20 for the eldest child and at the rate of £14.45 per week for subsequent children.

The HICBC applies where the recipient of the benefit or their partner has ‘adjusted net income’ of at least £50,000 a year. This is taxable income before personal allowances, but after gift aid and pension payments.

The HICB charge claws back 1% of the child benefit paid for every £100 by which adjusted net income exceeds £50,000. Where adjusted net income is £60,000 or above, the HICBC is equal to the child benefit paid for the tax year.

Basic rate taxpayers and HICBC

Despite its name, a person can be a basic rate taxpayer and still fall within the scope of the HICBC.

For 2022/23, a person in receipt of the standard personal allowance of £12,570 with no adjustments will not pay higher rate tax until their income exceeds £50,270. However, the HICBC bites where income exceeds £50,000. A person with income of £50,270 in receipt of child benefit will face a HICBC of 2.7% of their child benefit, despite being a basic rate taxpayer.

Pay the charge

Where the charge applies, the person liable for the charge must complete a self-assessment tax return and pay the charge, with any other tax and National Insurance due under self-assessment, by 31 January after the end of the tax year to which the charge relates.

Stop the benefit

Where income is at least equal to £60,000, the HICBC claws back all the child benefit received in the tax year. Consequently, there is no net benefit to receiving the child benefit, and there is the added hassle of completing the relevant section of the self-assessment tax return and paying the tax. As a result, it may be preferable not to receive the child benefit in the first place.

The recipient can elect to stop receiving child benefit by completing the online form or contacting the Child Benefit Office by phone or by post.

However, child benefit paid for a child under the age of 12 earns National Insurance credits that allow the year to be treated as a qualifying year for state benefit purposes. Consequently, anyone entitled to child benefit should still register for the benefit, even if they elect not to receive it, in order to benefit from the associated National Insurance credits. This is particularly important where the recipient does not pay sufficient National Insurance for the year to be a qualifying year but their partner would be liable for the charge if the child benefit is paid.

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