Child benefit is paid to the parents and guardians of children up to age 16, and children aged 16 to 19, if they stay in approved full-time education or training. It is £21.15 a week for the eldest child and £14 a week for each younger child.

The ‘high income child benefit tax charge’ was introduced in 2013 and affects families where one parent earns more than £50,000 a year.

Those with income over this figure are required to pay 1% income tax on the child benefit for each £100 of income above this. This means the value of child benefit is eroded to nil once the taxable income of one of the adults exceeds £60,000.

Even if you normally pay tax through the PAYE system, you must submit a tax return to pay the high income child benefit tax.

The charge has retained the same £50,000 income threshold when it was introduced in 2013. Accountancy firm Blick Rothernberg says this is encouraging people to opt out of child benefit or forcing them into the self-assessment tax return system. 

Robert Salter, a tax director at Blick Rothenberg, said: “The HIBC tax charge which ‘higher earners’ are liable to pay if they or their spouse / partner receive child benefit, has long been controversial and subject to criticism – both from an overall justice and fairness perspective and because of the additional administrative obligations that the system can create.  

“It has resulted in approximately 1 million taxpayers no longer being eligible for child benefit. This is either because they have deliberately opted out of receiving child benefit to avoid the subsequent tax charge – or are now required to have the higher earning spouse / partner complete a tax return and pay additional taxes to counteract the fact that their partner had the benefit.”

The HICBC charge impacts many couples on relatively modest incomes and not just the wealthiest families in society. Because it has retained the same £50,000 income threshold, the numbers impacted by the charge have more than doubled between 2013 and 2020 when the last numbers were available.

Salter added: “The government’s apparent wish to retain the system as it presently is – or their unwillingness to modify and update the system means that the HICBC charge will in due course impact increasing numbers of families on relatively lower income levels.

“This will result in ever more families being drawn into the self-assessment tax return system and being obliged to file an annual tax return each year.  This is particularly true, where the income of the higher earner could fluctuate between £50k and £60k during a tax year. It is not realistically appropriate for families in this situation to fully ‘opt out’ of receiving child benefit.”