Child Benefit and the High Income Charge: How to Keep More of Your Money

If you earn over £60,000 and have children, there's a good chance you're losing some or all of your Child Benefit through a tax charge — and you may not even realise it.

The High Income Child Benefit Charge (HICBC) is one of the most disliked parts of the UK tax system. But salary sacrifice can eliminate it entirely for many families.

What is Child Benefit?

Child Benefit is a government payment to parents or guardians responsible for a child under 16 (or under 20 if in approved education or training).

2024/25 rates:

• £25.60/week for the eldest or only child (£1,331/year)
• £16.95/week for each additional child (£881/year)

A family with 2 children receives £2,212/year in Child Benefit.

What is the High Income Child Benefit Charge?

If either parent's Adjusted Net Income (ANI) exceeds £60,000, HMRC claws back Child Benefit through a Self Assessment tax charge.

How the taper works in 2024/25:

• Below £60,000: no charge, keep all Child Benefit
• £60,000 to £80,000: repay 1% of Child Benefit for every £200 above £60,000
• Above £80,000: repay 100% — effectively no Child Benefit

The £80,000 cliff edge

Above £80,000, you repay 100% of Child Benefit. At this point, many parents choose to simply opt out of receiving Child Benefit — but this is a mistake.

How salary sacrifice eliminates the charge

The HICBC is based on your Adjusted Net Income — your gross income minus pension contributions made via salary sacrifice (and some other deductions).

This means salary sacrifice directly reduces your ANI, potentially bringing you below the £60,000 threshold.

Example:

Plus the income tax and NI savings on the £8,000 sacrifice — the total benefit is substantial.

The effective marginal tax rate trap

For incomes between £60,000 and £80,000, the effective marginal tax rate is much higher than the headline 40%.

For a parent with 2 children earning in this band:

• 40% income tax
• 2% NI
• ~11% effective HICBC rate (£2,212 over £20,000 range)
• Total: ~53% effective marginal rate

Every £1 of salary sacrifice in this band saves approximately 53p — making it one of the most valuable tax planning opportunities available.

The £100,000 Personal Allowance trap

There's a separate but related issue for those earning between £100,000 and £125,140. In this band, you lose £1 of Personal Allowance for every £2 earned, creating an effective 60% marginal tax rate.

Salary sacrifice reduces ANI here too, potentially restoring your Personal Allowance.

How to set up salary sacrifice to reduce HICBC

1. Calculate your ANI — use our calculator to see your current position
2. Work out how much to sacrifice — to bring ANI to £60,000 (or £100,000 if relevant)
3. Contact HR or payroll — request an increase in salary sacrifice pension contributions
4. Register for Self Assessment — if you've been receiving Child Benefit above £60,000 without paying the charge, you need to declare this to HMRC

Do you need to file Self Assessment?

Yes, if your ANI exceeds £60,000 and you or your partner received Child Benefit, you must register for Self Assessment and pay the HICBC each year.

If you've been unaware of this charge, HMRC can go back up to 4 years. It's better to come forward voluntarily.

Summary

• Child Benefit is worth up to £2,212/year for a 2-child family
• The HICBC claws it back between £60,000 and £80,000 ANI
• Salary sacrifice reduces ANI, potentially eliminating the charge entirely
• The effective marginal rate in the £60k–£80k band can exceed 50%
• Always register for Child Benefit even if you opt out of payments