What is the High-Income Child Benefit Charge, and how does it work?

The High-Income Child Benefit Charge (HICBC) reduces or removes your entitlement to Child Benefit altogether once your (or your partner’s) income goes over a certain level.

It’s a controversial tax rule which can easily catch directors out, especially if your income fluctuates and is taken as a mix of salary and dividends.

What is the HICBC?

The High Income Child Benefit Charge is a tax charge that applies where at least one partner in a household has an adjusted net income above £60,000.

It effectively clawbacks any Child Benefit received through the Self Assessment system (or, for employees, now via PAYE).

The way the charge is structured creates some well-known, unfair anomalies. For example, two individuals each earning £59,999 can keep the full benefit, whereas a single earner on £80,000 will lose it entirely, even if their partner has no income.

Child Benefit rates for 2025/26 are: £27.05 per week for the eldest or only child, and £17.90 per week for each additional child. For a family with two children, this equates to over £2,337 per year.

How the charge works in practice

If your adjusted net income exceeds £60,000, the charge is applied at a rate of 1% of the Child Benefit received for every £200 of income earned above the threshold.

In practice, this means:

• At £60,000, no charge is made
• At £70,000, 50% of the benefit is repaid
• At £80,000 or above, 100% is repaid

For example, if a household receives £2,337 in Child Benefit and the higher earner has income of £64,000, 20% of the benefit would be repaid via Self Assessment (or PAYE).

The charge is always applied to the higher earner, regardless of which partner actually receives the Child Benefit.

Why contractors are often affected

Contractors and company directors are more likely to be caught by the HICBC firstly as they are often higher earners.

Also, their income is not always constant and can vary from one tax year to the next.

If you earn dividend income, bonuses, and other one-off earnings, this can unexpectedly push your adjusted net income over the £60,000 threshold.

What counts as adjusted net income?

The charge is based on your adjusted net income, not just your salary. This includes:

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• Salary and bonuses
• Dividends
• Rental income
• Other taxable income

It is reduced by certain deductions, most notably:

• Pension contributions
• Gift Aid donations

This is important, as reducing adjusted net income below £60,000 can remove the charge entirely.

Can you avoid or reduce the charge?

You can’t avoid the charge, but you may be able to reduce your exposure to it with intelligent tax planning.

For example, you can make additional pension contributions to reduce adjusted net income, thereby reducing or eliminating the charge.

This is another reason why pension planning remains a rare tax-efficient way to extract income from your limited company. See our guide to contractor pensions for further details.

Another option is to stop receiving Child Benefit payments altogether. However, this is not always the right approach, as you may be giving up a benefit that you would only need to repay in part.

Do you need to complete a tax return?

If you are caught by the charge, you need to declare the amount of Child Benefit you receive.

If you already file a Self Assessment tax return each year, just enter the amount of Child Benefit you receive during the tax year in question.

Failure to do so can result in penalties, particularly where HMRC considers that the individual should reasonably have been aware of the charge.

If you don’t need to file a Self Assessment return for any other reason, you can now pay the HICBC directly through your PAYE tax code using HMRC’s online service (launched in 2025). This may apply to umbrella contractors as well as standard employees.

Further information

• Read the official HMRC guidance on the charge here: High Income Child Benefit Charge.
• Rates and thresholds are published here: Child Benefit rates.