Skip to main content

This is a new service – your feedback will help us to improve it.

  • Does Child Benefit count as Taxable Income?

    I am frustrated and confused by an ambiguity in the wording of the HMRC guidelines on Tax Free and Taxable State Benefits (Link: https://www.gov.uk/income-tax/taxfree-and-taxable-state-benefits) that says says "Child Benefit is not taxable (taxable based on income)" [sic]. Below is my understanding of the legislative rules, which I think the published guidelines misrepresent: Section 23 of ITA 2007 outlines the steps for calculating income tax liability, starting with identifying amounts of income charged to income tax. Section 677 of ITEPA 2003 (Table B) confirms that Child Benefit itself is exempt from income tax. This means it does not form part of taxable income. The term "Net Income" is defined in Section 23 Step 2 as total taxable income after certain reliefs. Since Child Benefit itself is not taxable, it is not included in "Net Income." This makes sense, because when income tax is calculated in in Section 23 Step 4, there is no income tax (i.e. 20%, 40% or 45%) on Child Benefit. The High Income Child Benefit Charge (HICBC) in Section 681B of ITEPA 2003 is “a charge to income tax.” but this just means that it is part of the tax calculation process, under Section 23 Step 7; it does not mean that the Child Benefit is taxable "income" under Step 1. After establishing Net Income per Section 23, Adjusted Net Income is calculated per Section 58 of ITA 2007. Have I understood correctly that per Section 677 of ITEPA 2003 (Table B) Child Benefit is not income for the purpose of calculating Net Income under section 23. If I have understood this correctly, then may I suggest HMRC clarify the guidelines on Tax Free and Taxable State Benefits (Link: https://www.gov.uk/income-tax/taxfree-and-taxable-state-benefits) and under Child Benefit, clarify the guidance that: Child Benefit is not included in the calculation of Net Income or Adjusted Net Income, however you may need to pay the high income child benefit charge (a tax) depending on your other income [sic]
  • Does Child Benefit received count towards Adjusted Net Income for Tax-Free-Childcare?

    Due to a good year and promotion, this is the first year that I am fortunate enough to have earned more than £80,000 and will need to pay back the Child Benefit via the High Income Child Benefit Charge. With regard to the Tax-Free Childcare and 30 hours free childcare, for the purpose of calculating if I am under the £100,000 threshold, do I include the Child Benefit received or not? 6th April 2024 –5 April 2025 Salary £98,000 Child Benefit (three children) £3,094 Is my Adjusted Net Income £98,000 or £101,094? I am worried about loosing a significant amount of Tax Free Childcare and 30 Free Hours.