High Income Child Benefit Charge Explained

If you claim child benefit and anyone in your household earns more than £60,000 then you should be very careful about what we call the “Child Benefit tax-trap”!

The “Child Benefit tax trap” refers to the High-Income Child Benefit Charge (HICBC), a tax that claws back Child Benefit from households where at least one person has an “adjusted net income” above £60,000.

The basics of “the Trap”:

• Where a households higher earner has adjusted net income above £60,000 per tax-year, a portion of any child benefit received should be paid back.
• For every £200 earned above £60,000, you lose 1% of any Child Benefit entitlement.
• If you are “lucky” enough to earn more than £80,000, the tax charge is equal to 100% of Child Benefit received, effectively removing it entirely. 
• Remember, the child benefit is usually paid to the Mother, whereas the tax charge applies to whomever has the higher income.

Why it is considered a “Trap”

• Because you are losing a benefit while paying income tax, your “effective” tax rate can spike significantly. For a parent with two children earning between £60,000 and £80,000, the effective tax rate is around 52-63%.
• The charge is based on the highest individual earner, not total household income.
• Most people hit by the charge must register for and file a Self Assessment tax return to pay it back, which many find an administrative burden.

The alternative is that you write to HMRC and tell then you want your child benefit to stop, however a little health warning is that if you have a none earning spouse who is relying on receipt of child benefit to make national insurance contributions (for qualification of state pension for example), opting out of receiving child benefit can also remove any positive impact on their National Insurance record!

How does child benefit work?

It is a state benefit that is non-means tested and usually paid to the Mother for all children aged under 16. It can still be possible to claim up to a child’s 20th birthday, providing they stay in “non-advanced” education.

The current weekly rate (2026/27 tax year) is £27.05 for your first child and £17.90 for any additional children. Meaning for a typical family with 2 children under 16, this would be worth £2,337.40 per year.

How does the tax charge work?

A tax charge is levied on the household’s highest earner where that individual’s taxable income exceeds £60,000 in that tax year.  Once taxable income exceeds £80,000 in a given tax year, the tax charge will be 100% of the benefit received.  For income between £600-£80,000, you will be required to repay 1% of your family’s child benefit for every £100 you earn over £60,000 per year.

The alternative is that you write to HMRC and tell then you want your child benefit to stop, however a little health warning is that if you have a none earning spouse who is relying on receipt of child benefit to make national insurance contributions (for qualification of state pension), opting out of receiving child benefit can also remove any positive impact on their National Insurance record!

If you are required to repay any child benefit, you should complete self-assessment to repay it!

What income is used in the calculation?

This is known as “adjusted net income” or ANI.  It includes:

• Salary & bonus’s
• Self-employed income or profts
• Savings interest
• Dividends
• Rental income
• Taxable benefits (company car/private medical etc)

If the total is below £60,000 = no tax charge.  If over, then self-assessment is required.

Household Income	Highest Earner	Child Benefit Charge
£59,000 + £59,000	£59,000	None
£65,000 + £20,000	£65,000	Partial
£80,000 + £0	£80,000	Full

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How to avoid the tax charge?

• Top up a pension.  Any personal payments made to a pension will effectively reduce your taxable income! 
• Payments to a recognised charity made with “Gift Aid” will also reduce your taxable income. 
• If your employer can and will, you could consider using “salary sacrifice” to pay for any additional benefits.
• Where the higher earner holds income producing investments or receives the rental income from property for example, could this be shifted to the lower earning spouse? 
• Where profits from self-employment or dividend income from a business, again could this be shifted across?

Why many people consider it a “tax-trap”

Bear in mind the following situations:

Family 1: A couple where both earn £59,000 (household total £118,000) keep all their Child Benefit.

Family 2: A single-earner household on £80,000 loses all their child benefit.

Tax rules can change and individual circumstances vary. Seeking personalised financial advice can help ensure you make the most appropriate decisions for your situation.

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