If either you or your partner has an income of more than £50,000 a year before tax then you’ll have to pay back some (or all) of your Child Benefit in the form of extra Income Tax.
- You and your partner each earn less than £50,000 per year
- Either you or your partner earns between £50,000 and £60,000 per year
- Either you or your partner earns more than £60,000 per year
- What you need to do if you’re a new parent
- If you want your Child Benefit payments to stop
- If you want to continue getting your Child Benefit
You and your partner each earn less than £50,000 per year
If you and your partner each earn less than £50,000 a year, you will receive the full amount of Child Benefit without having to pay any of it back.
Either you or your partner earns between £50,000 and £60,000 per year
If either you or your partner earns between £50,000 and £60,000 a year before tax, you’ll have to pay a portion of your Child Benefit back in extra Income Tax.
How does it work?
Top tip
Claiming Child Benefit will help you protect your State Pension, if you’re at home looking after your baby or children and not paying National Insurance, as you’ll get credits towards your State Pension. Phone the Child Benefit Office on 0300 200 3100.
You will still get paid the full amount of Child Benefit each month (or each week, if you’re paid weekly).
However, whichever one of you has the higher income, will have to pay more Income Tax to repay the portion of Child Benefit you’re no longer entitled to.
You will need to fill in a Self Assessment tax return so HM Revenue & Customs (HMRC) can calculate the amount of extra Income Tax you’ll have to pay.
Register for Self Assessment on the GOV.UK website.
How much do you have to pay back?
You will be required to pay back 1% (one per cent) of your family’s Child Benefit for every extra £100 you earn over £50,000 each year.
For example:
Katya and Leroy have a baby. Katya is staying at home to look after the baby. Leroy earns £51,000 a year.
Because Leroy earns more than £50,000, he has to pay extra tax to repay some of their Child Benefit.
His income is £1,000 (10 x £100) over the limit, so the extra tax is 10% of their Child Benefit of £20.70 per week. So, he pays extra tax of £107.64 a year (£2.07 x 52).
Get an estimate of how much tax you’d have to pay because of your Child Benefit on the GOV.UK website.
Either you or your partner earns more than £60,000 per year
If either you or your partner has an income of more than £60,000 a year before tax, you will have to repay all of your Child Benefit as Income Tax.
How does it work?
You will still get paid the full amount of Child Benefit each month (or each week, if you’re paid weekly).
However, whichever one of you has the higher income, will have to pay back the full amount in the form of Income Tax.
You will need to fill in a Self-Assessment tax return so HM Revenue & Customs (HMRC) can calculate the extra Income Tax you’ll have to pay.
Register for Self Assessment on the GOV.UK website.
What you need to do if you’re a new parent
By making sure you still put in your claim for Child Benefit – even if you’re earning over £50,000 per year, and you’ve decided not to take the payments — you ensure you don’t miss out on:
- National Insurance credits protect your entitlement to State Pension
- your child being automatically issued with a National Insurance number before their 16th birthday
- other benefits, such as Guardian’s Allowance.
You can find out more in our guide Claiming Child Benefit.
If you want your Child Benefit payments to stop
You can choose not to receive your Child Benefit payments any more.
- This avoids the hassle of paying additional tax.
- You won’t have to complete a tax return.
- If your annual income is between £50,000 and £60,000, you’ll end up out of pocket since you’ll be giving up the proportion of Child Benefit you are still entitled to.
How can you stop your payments?
You should let HMRC know you want to stop your payments. Use the form on the HMRC website.
You can stop your Child Benefit payments on the GOV.UK website.
If you want to continue getting your Child Benefit
Top tip
Ideally, you should put your Child Benefit payments aside in a high interest savings account until you know how much you need to pay back.
If you decide to continue getting your payments, you’ll need to register for Self Assessment.
Find out more about registering for Self Assessment on the GOV.UK website.
You can choose to keep your Child Benefit payments.
- If your income is between £50,000 and £60,000, you will still get however much you’re entitled to.
- Even if you’re earning over £60,000, if you put your Child Benefit aside in a savings account, you can earn interest on the money before you have to pay your tax bill.
- You will need to pay the extra tax.
- You’ll have to complete a tax return.
How to choose a savings account
Comparison websites are a good starting point if you are trying to find a savings account tailored to your needs.
We recommend the following websites for comparing savings accounts:
Remember:
- Comparison websites won’t all give you the same results, so make sure you use more than one site before making a decision. You want to get the highest interest rate you can find.
- It is also important for you to do some research into the type of product and features you need before making a purchase or changing supplier.
- Find out more in our guide Finding the best deals with price comparison websites.
This article is provided by the Money Advice Service.
