How is the high income child benefit charge calculated under section 681C of ITEPA 2003?

The charge is calculated as an 'appropriate percentage' of total child benefit received during the tax year. The percentage is the lower of 100% and the result of subtracting £60,000 from adjusted net income and dividing by £200. This creates a taper where the charge increases by 1% for every £200 of income above £60,000.

What is the appropriate percentage used in the high income child benefit charge taper?

The appropriate percentage is the lower of 100% and a formula result: adjusted net income minus £60,000, divided by £200. This means if adjusted net income is £60,000 or below there is no charge. At £80,000 or above the charge equals full child benefit received. The taper increases by one percentage point per £200 of income above £60,000.

How does the rounding rule work for the high income child benefit charge under section 681C?

If the total child benefit figure, the calculated percentage, or the final charge amount is not a whole number at any stage of the calculation, it must be rounded down to the nearest whole number. This rounding rule always works in the taxpayer's favour, reducing any fractional amounts downward.

Can you give an example of the high income child benefit charge calculation?

If a person has adjusted net income of £70,000 and their partner claims £2,000 child benefit, the formula gives (£70,000 minus £60,000) divided by £200 equals 50%. The charge is 50% of £2,000, which is £1,000. If income were £80,000 or more, the percentage would be capped at 100% and the full £2,000 would be charged.

Income Tax (Earnings and Pensions) Act 2003 section 681C

The amount of the charge

Section 681C sets out how to calculate the amount of the high income child benefit charge that a person owes for a tax year, using a tapered percentage applied to the total child benefit received.

The charge is calculated as an "appropriate percentage" of the total child benefit received in the tax year (covering amounts under both condition A and condition B from section 681B)
The appropriate percentage is the lower of 100% and a figure calculated by the formula: (adjusted net income minus £60,000) divided by £200, expressed as a percentage — meaning the charge increases by 1% for every £200 of income above £60,000
The taper operates between adjusted net income of £60,000 and £80,000, so that someone earning £80,000 or more repays the full amount of child benefit received
Where the total child benefit amount, the charge itself, or the calculated percentage is not a whole number, it must be rounded down to the nearest whole number

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