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Child Benefit


This is a guide for RCN members on Child Benefit. It gives an overview on eligibility and how to apply.

Gross taxable income

The Child Benefit High Income charge came into effect on the 7 January 2013. It affected those whose income (or partners income) was above £50,000 per year.

If you are concerned about your eligibility, it is important to ensure that you correctly calculate your Adjusted Net Income. To do this;

Firstly, calculate your Gross taxable Income - examples of this include:

  • earnings from employment
  • earnings from self employment
  • most pension income (state, company and personal pensions)
  • interest on most savings (but not ISAs)
  • income from non-ISA shares (dividends)
  • rental income (except the first £4250 a year from a lodger in your own home)
  • taxable DWP Benefits

For a full list of taxable income please see www.hmrc.gov.uk. There are also payments that are made from your income that are disregarded, thus bringing down the Adjusted Net Income figure that you need to declare to the HMRC. Adjusted Net Income is the total taxable income less certain tax reliefs.

Secondly, take off Gift Aid donations. For every £1 of Gift Aid donations you make, you can take £1.25 from your net income.

Thirdly, take off pension contributions. If you made a contribution to a pension scheme where your pension provider has already given you tax relief at basic rate, take off the 'grossed -up' amount (whatever you paid plus the basic rate of tax). So for every £1 of pension contribution you made take £1.25 from you net income.

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Example

Macy's total taxable income is £59,000. This is made up from

  • income from employment £54000
  • plus rental income £3000
  • plus savings interest £2000.

Macy makes private pension contributions without tax relief of £4750. So her net income is £54,250 (£59,000 less £4750). Macy makes an annual Gift Aid donation to the RCN's Foundation Benevolent Fund of £1000. Because of this she can take £1250 from her net income. Macy's adjusted net income is £53,000 (£54250 less £1250).

As her adjusted net income is above £50,000, this figure is used to work out her High Income Child Benefit Charge.

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Reducing taxable income

There are a number of options. You could consider:

  • paying more into your pension
  • making a charitable Gift Aid Donation
  • making a salary sacrifice and opt to have some of your pay paid in child care vouchers.
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Need more advice?

Call RCN Direct on: 0345 772 6100