How can pension contributions help you reclaim the High Income Child Benefit Charge?

01 How the charge works

Where a person's adjusted net income exceeds £60,000 and they or their partner receive Child Benefit, a charge applies to the higher earner. It is 1% of the Child Benefit received for every £200 of income above £60,000, so it reaches 100% at £80,000.

The charge is on the individual with the higher adjusted net income, not on the household. Two partners each earning £55,000 pay nothing; one earning £85,000 with a partner earning nothing pays the full charge.

It is collected through Self Assessment, which is why it catches people who have never filed a return. Registering for it is a requirement rather than an option once the charge applies.

One feature of the 2024 change altered the arithmetic materially. The threshold moved from £50,000 to £60,000 and the taper widened from £10,000 to £20,000, which halved the rate at which Child Benefit is withdrawn. The charge is therefore less brutal than it was, and the contribution needed to escape it is correspondingly larger.

Source: High Income Child Benefit Charge

02 Why a pension contribution recovers it

Adjusted net income is total taxable income less personal pension contributions grossed up and less Gift Aid donations grossed up. A gross pension contribution therefore reduces the figure the charge is measured against, pound for pound.

Someone with £74,000 of adjusted net income contributing £14,000 gross brings it to £60,000, recovers the whole of the Child Benefit, and receives 40% relief on the contribution. The two effects stack.

The effective rate rises with the number of children, because more Child Benefit is being recovered by the same contribution. For a family with three children the effective relief on the slice between £60,000 and £80,000 is well above 60%.

It is worth putting a number on the interaction rather than leaving it as a principle. On a family with two children receiving around £2,200 a year of Child Benefit, a £14,000 gross contribution taking income from £74,000 to £60,000 recovers about £1,540 of benefit alongside £5,600 of tax relief — an effective return of just over half the contribution, in the year it is made.

On the defaults above, the worked example shows £7,980. A gross contribution of £14,000 recovers £2,380 of Child Benefit and £5,600 of relief — an effective 57%.

Source: Pension tax relief

03 Who should make the contribution

The person whose adjusted net income triggers the charge. A contribution by the lower-earning partner does nothing at all for the charge, because it is assessed on the higher earner's income alone.

Where both partners are above £60,000, the charge falls on whichever has the higher adjusted net income, so a contribution by that person can shift the liability rather than removing it. Working out both figures first avoids solving the wrong problem.

Salary sacrifice achieves the same reduction and saves National Insurance too, but it has to be agreed with the employer in advance and cannot be applied retrospectively at the end of the year.

Source: Salary sacrifice for employers

04 Claiming, and not opting out

Claim Child Benefit even where the charge will claw all of it back, and elect to receive nil payment if you prefer not to handle the repayment. The claim carries a National Insurance credit for the claimant while a child is under 12, and that credit is worth far more than the administration.

Households that never claimed have gaps in a National Insurance record that a backdated claim only partly repairs, since backdating is limited to three months.

Where the claim exists and the charge applies, the contribution route can restore the payment as well as the credit, which is the best of both.

Source: Child Benefit

05 Getting the timing right

Adjusted net income is only knowable once bonuses, dividends and rental profit are settled, so the useful moment is late in the tax year. A contribution has to be paid before 5 April to count for that year.

Estimate in January, contribute in February or March, and claim the higher-rate relief on the return. Relief at source only delivers the first 20 points, and the balance has to be claimed.

Where income is unpredictable, a monthly contribution plus a March top-up gets both the habit and the accuracy, which is the same pattern that works for any variable income.

One further check belongs in the same conversation: whether the contribution takes you below any other threshold at the same time. Adjusted net income drives the personal allowance taper at £100,000 as well, and someone whose income sits above that is looking at two effects from a single contribution.

Source: Self Assessment tax returns