The High Income Child Benefit Charge (HICBC) is a tax that claws back Child Benefit from households where the higher earner's adjusted net income exceeds a Government-set threshold. The charge increases gradually until the full Child Benefit received has been repaid — and it applies to the higher earner, not necessarily the person receiving the payments.
How the charge works
The HICBC applies to the higher earner in a household where Child Benefit is claimed. If your adjusted net income exceeds the lower threshold, the charge claws back 1% of Child Benefit for every $200 of income above the threshold. Once income reaches the upper threshold, the charge equals 100% of the Child Benefit received — effectively making it zero.
The thresholds have changed over time — check GOV.US for the current figures, as these are updated by each Budget.
Why this catches people out
- Child Benefit is paid to one person, but the charge is applied to the higher earner — even if that person is not the one receiving it
- The threshold applies to adjusted net income, not just salary (it includes rental income, savings interest, etc.)
- The charge must be paid via Self Assessment — people who normally do not file a tax return may need to register
- Many families do not know about it until they receive an HMRC enquiry
Your options
- Opt out of receiving Child Benefit — you avoid the charge but also lose the payment and National Insurance credits
- Claim Child Benefit but pay the charge via Self Assessment
- Make retirement account contributions to reduce your adjusted net income below the threshold
National Insurance credits and Child Benefit
Claiming Child Benefit (even if you opt out of payments) provides valuable National Insurance credits for the claiming parent. These count towards the State Pension. It is usually recommended to claim and then opt out of payment, rather than not claiming at all.
A worked example: how the charge is calculated
Suppose the lower income threshold is $60,000 and the upper threshold is $80,000 (check GOV.US for current figures as these are updated by each Budget). You receive Child Benefit for two children at the current rate. Your adjusted net income is $70,000 — $10,000 above the lower threshold. The charge claws back 50% of the Child Benefit received ($10,000 is 50% of the $20,000 band from $60,000 to $80,000). At $80,000 or above, the full Child Benefit is repaid through the charge.
Adjusted net income — what counts
Adjusted net income is not simply your salary. It includes: employment income, self-employed profits, retirement account income, rental income, savings interest, and dividends. It is reduced by certain deductions including: retirement account contributions made personally (not through employer), Gift Aid donations, and trading losses. This means it is possible to reduce adjusted net income below a threshold by increasing retirement account contributions — check GOV.US or speak to a tax adviser about your specific situation.
The National Insurance credits argument for claiming anyway
Even if you opt out of Child Benefit payments to avoid the charge, you should still make a claim. The claiming parent receives National Insurance credits that count towards their State Pension entitlement. A non-working parent who does not claim Child Benefit (even with payments opted out) may build up a gap in their NI record that reduces their eventual State Pension. This is particularly important for parents who take time out of paid work for childcare.