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Child Benefit Tax Charge – CII R03 or AF1

Child Benefit Tax Charge – CII R03 or AF1

The high income Child Benefit Tax Charge is a tax charge for individuals with  total taxable income over £50,000 who are in receipt of Child Benefit. The charge gradually claws back up to 100% of the benefit as earnings increase over £50,000. The charge is collected via Self-assessment.

The tax charge is 1% of the child benefit for every £100 of income above £50,000 up to £60,000. If  the adjusted net income of an individual increases over £60,000 an election should be made not to receive the benefit.

To see how it works, here’s an example:

Jo has adjusted net income of £54,000 and receives child benefit currently of £2,449 per annum for her children. The charge on her will be:

£2,449 x 1% = £24.49

£54,000 – £50,000 = £4,000/100 = 40

£24.49 x 40 = £979.60

How can you reduce the charge?

The most obvious way to reduce your child benefit tax charge is to make pension contributions to reduce adjusted net income. Anyone got any other ideas?