Cotswold accountants warn parents over the High Income Child Benefit Charge

Sharla Dandy

Professionals at a Cotswold-based accountancy firm are warning parents across the region about the High Income Child Benefit Charge.

Members of the team at Cirencester and Malmesbury-based McGills Chartered Accountants say that there is good reason for high earners to think twice about opting out of the charge, despite some surprising quirks in how it is applied.

The High Income Child Benefit Charge was introduced by the Government in order to recoup some or all of the Child Benefit received by households in which at least one person earns more than £50,000 a year and they or their partner or spouse receives Child Benefit.

The charge is set so that Child Benefit is gradually cancelled out between £50,000 and £60,000, with people earning above this rate effectively having their child benefit entirely cancelled out.

However, some of the circumstances in which the charge does and does not apply could seem intuitively strange.

For instance, the charge only applies to individual incomes and not joint incomes. This means that a couple where one person does not work but the other earns £50,000 would pay, while a couple both earning just under £50,000 would not pay, despite having nearly twice the combined income of the first couple.

Parents may also be surprised that the charge applies to cohabiting couples, even where the partner earning more than £50,000 is not a parent of the child or children.

Similarly, the charge also applies to separated parents, when one of them earns more than £50,000.

Sharla Dandy, a Partner at McGills Chartered Accountants, said: “Given the quirks of the High Income Child Benefit Charge, it might seem sensible to opt-out of receiving Child Benefit altogether.

“However, you must have at least 35 qualifying years of National Insurance contributions to qualify for the full state pension in retirement, which can be a challenge if you have taken a career break to look after children.

“Paying the High Income Child Benefit Charge provides National Insurance credits to a non-earning partner, which can make a significant difference in retirement.”