How to avoid the child benefit tax charge
Former independent financial adviser (IFA) Jason Butler shares some simple tips for families who want to reduce their tax bills while keeping their child benefit payments. Learn more here.
For many years, the child benefit tax charge for higher earners has been impacting those who qualify for child benefit.
The implications of this charge aren't immediately obvious, so read on to find out how it may affect you and how to reduce your exposure to this tax while continuing to receive child benefits.
You can claim child benefit if you’re responsible for a child under 16.
The current benefit for the 2026/27 tax year is £27.05 a week for the first child.
A tax will be levied on the household’s highest earner if that person's taxable income exceeds £60,000 a year.
You can ask HMRC to stop payments if you're likely to exceed the threshold.
There may be steps you can take to avoid the tax charge and keep more of your child benefit.
Who can claim child benefit?
Child benefit can be claimed if you’re responsible for a child under 16. Once a child reaches this age, it may still be possible to claim child benefit until their 20th birthday, if they remain in approved education or training.
The current benefit for the 2025/26 tax year is £27.05 per week for the eldest or only child (£1,406.60 annually), £17.90 per week for each additional child (£930.80 annually).
In the 2026/27 tax year, a couple with one child would receive £1,406.60 annually, or £2,337.40 if they had two children.
The child benefit tax charge for higher-earning parents
A tax charge will be levied on the household’s highest earner if that person's taxable income exceeds £60,000 a year and you or your partner get child benefit.
You may also have to pay the high income child benefit charge if someone else receives child benefit for a child living with you and pays at least an equal amount for the child’s upkeep.
The amount of money that is clawed back from your child benefit using the tax charge is tapered. If you earn over £80,000 you will lose all of your child benefit. Below this you will lose a proportion.
This means that once taxable income exceeds £80,000 in a tax year, the charge, negates the benefit received.
What’s your adjusted net income (ANI)?
The income figure used to test against the £60,000 child benefit tax charge threshold is the same to assess entitlement to the personal allowance and age-related element of the personal allowance.
It is known as adjusted net income (ANI) and is calculated by adding up the total taxable income, including rental income and interest, or taxable profits if self-employed and deducting trading losses (for self-employed), pension contributions and Gift Aid charitable donations.
The personal allowance should not be deducted in arriving at ANI.
If the net amount is below £60,000, then no child benefit tax charge is payable.
When to pay child benefit tax
Is it worth making a claim for child benefit in the first place? Not always.
Where the high-income parent has sustainable taxable income of over £80,000 per year and they can’t or don’t want to act to reduce this, and the other parent is accruing entitlement for a state pension via national insurance (NI) contributions, it may not be worthwhile to claim.
However, if a parent stays at home to look after a child and doesn’t work or pay NI, they should claim child benefit for a child under the age of 12, as this will protect their entitlement to a state pension by giving NI credits for each year they claim it.
A solution to this is to claim the NI credits without claiming the benefit itself. To do this, you must fill out the Child Benefit claim form to be registered.
Select the "no payment" option: On the form, you can specifically tick a box to state you do not want to receive payments.
How to stop the child benefit charge
To avoid a tax charge if you’re likely to exceed the threshold, the parent can ask HMRC to stop paying child benefit. If you already receive payments, you can use the HMRC online service or the HMRC app to "opt out" of future payments immediately.
A self-assessment return must still be filed by the higher earner if any payment is received in a tax year. Payments can be restarted if circumstances change.
However, depending on your circumstances, preferences and resources, there are several potential ways that you might reduce or completely avoid the tax charge without stopping your child benefit, leaving you better off in the long run.
These all involve reducing your ANI.
Make a pension contribution
Provided you have sufficient earnings and a remaining pension annual allowance in the current tax year, you could make a personal contribution to a registered pension.
This would not only spare you a tax charge, but it would also boost your retirement savings.
The pension contribution would reduce your ANI and potentially wipe out the child benefit tax charge. You may also qualify for 40% higher income tax relief on the contribution.
If one parent is a high earner under child benefit tax rules, but contributions are paid to a pension for the other parent who does not meet the high earner definition, it may be advisable to redirect these to the higher earner’s pension so that their income is reduced to avoid a tax charge.
Salary sacrifice
With your employer’s agreement, you could reduce your contractual income for an equivalent employer payment to your pension, known as salary sacrifice.
In addition to the tax savings, you will also save on NI contributions.
In addition to the tax savings, you will also save on NI contributions. Salary sacrifice on pensions is being capped at £2000 from April 2029, but at present this is a way to boost your pension, save your employer money and keep more child benefit.
Charitable gifts
Cash gifts to charity under Gift Aid reduce taxable income like an individual pension contribution.
Similar to pension contributions, Gift Aid payments are paid net of basic rate tax.
The value of a gift of investment holdings or real property at full market rate will be fully deductible from ANI to determine whether or not your ANI exceeds £60,000.
Make sure you fill out Gift Aid forms when you donate to charity, and report your charitable giving either on your Self Assessment form or by asking HMRC to change your tax code if you don’t fill in a form.
Charitable gifts
Cash gifts to charity under Gift Aid reduce taxable income like an individual pension contribution.
Similar to pension contributions, Gift Aid payments are paid net of basic rate tax.
The value of a gift of investment holdings or real property at full market rate will be fully deductible from ANI to determine whether or not your ANI exceeds £60,000.
Top tip: Retrospective donations
If you’re filling in your tax return and realise you’re about to pay back your Child Benefit, it isn’t too late to make a charitable donation to keep the benefit.
You are allowed to make a donation and ask HMRC to treat it as being made the year previously. If you do this, for every £1 you donate, your ANI for the previous year is reduced by £1.25.
Transfer income-paying investments to your spouse
If the person assessed for the tax charge is also the holder of income-paying investments, consider transferring these to their lower-income spouse (or civil partner).
As the gross value of savings income is included in taxable income, this could make a difference.
Get financial advice
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