Understand how the child benefit tax charge works and how to declare it on your tax return to repay child benefit money you have received if you earn more than £50,000 including through self-employment.
Friendly Disclaimer: Whilst I am an accountant, I’m not your accountant. The information in this article is legally correct but it is for guidance and information purposes only. Everyone’s situation is different and unique so you’ll need to use your own best judgement when applying the advice that I give to your situation. If you are unsure or have a question be sure to contact a qualified professional because mistakes can result in penalties.
1. Do You Need to Show Child Benefit on Your Self-Assessment Tax Return?
Child Benefit is not taxable income and does not normally need to appear on your tax return, if you already fill in a tax return. For example, because you have registered as self-employed.
However, if you earn more than £50,000, then you’ll need to declare Child Benefit you have received on your self-assessment tax return and pay what is known as Child Benefit tax charge. That means you’ll start to repay any child benefit you have received at a set percentage of what you earn, until your income reaches £60,000 and you have repaid it in full. Therefore, if you or your partner earn more than £60,000, you need to repay all Child Benefit you have received.
2. What Counts as Income for the £50,000 Limit for Child Benefit?
Your income may be made up of different elements and you may have deductions that need to be included when working out your income.
The following count as income:
- Gross salary before tax on payslips;
- Bonuses;
- Taxable benefits like a company car or medical cover;
- Income from pensions before tax, including the state pension;
- Other income before tax like self-employment or dividends;
- Rental income.
The following are deductions you can make when working out your income for the child benefit tax charge purposes:
- Pension contributions deducted from your pay;
- Retirement annuity contracts;
- Cycle to work scheme
- Donations made under gift aid.
3. How Much is Child Benefit?
There are two child benefit rates, with a higher amount payable for your first child and a lowered amount for any additional children. Here are the current rates:
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Say you have two children and both are eligible for child benefit, you will receive £36.25 per week (£21.80 + £14.45).
You can find out more about child benefit including how it is paid, when and for how long in this guide.
4. How is the Child Benefit Tax Charge Calculated?
You have to pay back 1% of child benefit received for every £100 you earn over £50,000. Here’s an example:
Chris and Jo have their first baby and are eligible to claim child benefit. Chris decides to stay home to look after the baby, while Jo stays in work earning £52,000 a year. Therefore, Chris will be able to elect to be paid the child benefit. That way, a National Insurance credit will be given that avoids gaps which affect state pension. As Jo earns more than £50,000, some Child Benefit will need to be repaid in the form of income tax.
The extra tax that needs to be paid is based on the £2,000 over the £50,000 earnings limit (£2,000/100 = 20) and the amount of child benefit they are paid (currently £21.15 per week for 2021/2022). So, the total extra tax to pay will be 20% of £21.15 per week annualised, which is £219.96 (£21.15 x 20% x 52 weeks).
Use the HMRC Calculator to Estimate How Much Child Benefit Income Tax Charge You’ll Pay
5. How To Show Child Benefit on Your Tax Return
If you are not registered for self-assessment to complete a tax return, then you’ll need to register with HMRC to declare your Child Benefit and pay the tax charge. You’ll know you’ve successfully registered for self-assessment because HMRC will send you a UTR number.
You need to register with HMRC by the 5th October following the tax year you started receiving child benefits. So, if you started to receive child benefit in February 2022, you’ll need to register for self-assessment by 5th October 2022.
If you or your partner earn less than £50,000 then you don’t need to worry, your child benefit will be paid to you in full and you won’t need to register.
Once registered, you’ll need to sign in to your .GOV account with your HMRC user ID to fill in your tax return by the 31 January each year and declare your taxable income for the previous tax year. That includes your employment income, even though you’ve already paid income tax on it.
You’ll need to let HMRC know need to tick the box in the tailor your return section to let HMRC know you need to pay the high income child benefit charge.
Once you have done that you’ll be presented with the following screen:
Don’t forget to bookmark this page for help filling in your tax return at tax-time.
You’ll need to fill in all the boxes and then HMRC will calculate the amount of child benefit you were entitled to during the tax year. The Child Benefit tax charge you need to pay will be calculated automatically and included in the “Tax Calculation” section.
6. How to Avoid Completing a Self Assessment Tax Return for Child Benefit
If you or your partner earn more than £60,000, you need to repay all Child Benefit you have received. You can make an election to stop receiving child benefit payments, that way you’ll avoid the hassle of getting paid only for you to give it back.
It is important to register and elect to stop getting payments since the child benefit scheme includes National Insurance credits. These credits avoid any gaps in National Insurance contributions, that way your state pension is protected. So, if your partner stays at home to look after your child but you earn more than £60,000, you’ll still be able to protect your partners’ State Pension. It also means your child will automatically receive their National Insurance number when they turn 16.
You can stop your Child Benefit payments by:
- Completing the online form in your personal tax account;
- Calling the Child Benefit Office on 0300 200 3100
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