The child benefit tax charge: the advice essentials


The child benefit tax charge, introduced on 7 January, affects over one million families. A family with 2 children could see their annual spendable income drop by up to £1,752 pa in 2013/14; those with 3 children could lose £2,449 pa. At a time when prices are rising faster than incomes, it will be critical for many families to know how they’ll be affected, and what options they may have to improve their situation.

What are the implications of the tax charge?

Benefit payments will continue to be paid in full to the claimant, but will be clawed back by way of a tax charge on the household’s highest earner if their personal taxable income exceeds £50,000 per tax year. For you, this means:

What action can you take?
Advice will very much depend on the personal circumstances and priorities of yourself. The possibilities include:

What is taxable income?
The income figure used to test against this new £50,000 threshold is the same one used to assess entitlement to the personal allowance and the age related element of personal allowance – ‘adjusted net income’ (ANI). The calculation is broadly:

The SUM of:


Note, personal allowances should NOT be deducted in arriving at ANI.

What are the current rates of child benefit?
The current weekly rates of benefit are £20.30 for the first child, and £13.40 for each subsequent child. These rates will remain unchanged in 2013/14. Benefit can be claimed for all children under the age of 16. Once a child reaches this age, it may still be possible to claim benefit until their 20th birthday e.g. they remain in full time ‘non-advanced’ education. The Child Benefit Office will contact parents before a child reaches 16 to determine if benefit can still be claimed.

The child benefit tax charge has been heavily criticised from some quarters. It’s seen as unfair and complex. But it’s with us, so you will need advice to see through the complexity and secure the best result for yourselves.