By David Porter, Financial Planning Consultant, Armstrong Watson LLP

IF you or your partner has a pre-tax income of more than £50,000 a year, you’ll have to pay back some (or all) of your Child Benefit in the form of extra Income Tax.

Each person’s income is taken in isolation, so if one partner has an income exceeding £50,000 each year, the higher earner will have extra tax to pay - known as High Income Child Benefit Charge - but the child benefit amount will still be paid. If either income exceeds £60,000 the extra tax will cancel out the Child Benefit amount.

For every £100 of income above £50,000, one per cent of the Child Benefit amount needs to be paid as High Income Child Benefit Charge via a self-assessment tax return. Visit to work out how much tax will become due. For those affected, there are options to mitigate some or all of the tax.

Ways to avoid the extra tax, and reduce your taxable income, include making a pension contribution, opting to sacrifice salary for childcare vouchers (if your employer supports them) or making charitable donations.

Pension payments taken from income before you pay tax have the effect of reducing your taxable income, so if you reduce your income to less than £50,000 (after all allowances) there will be no High-Income Child Benefit Charge to pay. Additionally, pension contributions for those with this level of earnings will attract tax relief at 40 per cent with 20 per cent of the payment being reclaimed via self-assessment.

An unintended consequence of the High Income Child Benefit Charge is that some people, whose individual earnings are above the threshold, are no longer claiming Child Benefit to avoid the tax, meaning those who have a partner who is not earning, or are a lower earner, could be missing out on an element of their accrual to the State Pension scheme.

It is possible to elect not to receive the Child Benefit, and avoid the payment of extra tax, however, you are still encouraged to complete the Child Benefit claim form so you continue to accrue National Insurance (NI) credits. You now need a minimum of 10 qualifying years to receive anything from the state and 35 years to qualify for the full state pension. This is why it’s important to still claim the benefit even if there is no monetary value. If you are affected, our experts can provide independent financial advice based on your personal circumstances. Please contact David Porter, on 01756 620049 or email