High Income Child Benefit Charge: how pension contributions help.
The HICBC claws back child benefit when the higher earner in a household exceeds £60,000. Pension contributions reduce adjusted net income — and with it, the charge.
- ▸The High Income Child Benefit Charge applies to the higher-earning partner in a household. It claws back 1% of the annual child benefit for every £200 of adjusted net income above £60,000.
- ▸At £80,000 adjusted net income, the clawback reaches 100% — the full benefit is repaid via self-assessment.
- ▸Pension contributions (salary sacrifice or personal) reduce adjusted net income. A contribution large enough to bring income to £60,000 or below eliminates the charge entirely.
- ▸The HICBC pension calculator at /tools/hicbc-pension-calculator models the interaction for any income and number of children.
How the HICBC works (1% per £200 over £60,000)
The High Income Child Benefit Charge was introduced in 2013 and revised in April 2024. It applies to the higher earner in a household that claims child benefit, regardless of who actually receives the payment.
The charge is calculated as 1% of the total annual child benefit for every £200 of adjusted net income above £60,000. The taper runs from £60,000 to £80,000: at £80,000 or above, the charge equals 100% of the benefit, effectively cancelling it out.
For 2025/26, child benefit rates are:
- Eldest child: £26.05 per week (£1,354.60 per year)
- Each subsequent child: £17.25 per week (£897.00 per year)
A household with two children receives £2,251.60 per year. If the higher earner's adjusted net income is £70,000 — halfway through the taper — the charge is 50% of £2,251.60 = £1,125.80, collected through self-assessment.
Why adjusted net income is the number that matters
The HICBC is not calculated on gross salary. It uses adjusted net income, which is gross income minus:
- Pension contributions (personal contributions gross up; salary sacrifice reduces gross pay)
- Gift Aid donations (grossed up)
- Trading losses
This distinction is the entire basis of the pension strategy. The headline salary might be £70,000, but a £10,000 pension contribution brings adjusted net income to £60,000 — below the HICBC threshold.
The HICBC is assessed on an individual basis. Only the income of the higher earner matters. If both partners earn £55,000, no charge applies. If one earns £75,000 and the other earns nothing, the charge applies.
Pension contributions reduce adjusted net income
Both salary sacrifice and personal pension contributions reduce adjusted net income for HICBC purposes. The mechanics differ slightly:
Salary sacrifice: The employee agrees to a lower contractual salary. The employer pays the difference into the pension. Because gross pay is reduced, adjusted net income falls directly. This also saves employee National Insurance (2% above £50,270) and employer NI (13.8%). The salary sacrifice calculator shows the combined benefit.
Personal contributions (relief at source): The employee pays into a SIPP or personal pension from post-tax income. The provider claims basic-rate relief (20%) from HMRC. The employee claims higher-rate relief (an additional 20%) through self-assessment. The gross contribution is deducted from adjusted net income.
In both cases, the income reduction is pound-for-pound. A £5,000 gross pension contribution reduces adjusted net income by £5,000.
Worked example: clawing back child benefit
Scenario: Emma earns £68,000 and has two children. She claims child benefit of £2,251.60 per year.
Without pension adjustment:
- Adjusted net income: £68,000
- Excess over £60,000: £8,000
- Number of £200 increments: 40
- HICBC: 40% x £2,251.60 = £900.64
- Net child benefit retained: £1,350.96
With an £8,000 salary sacrifice:
- Adjusted net income: £60,000
- Excess over £60,000: £0
- HICBC: £0
- Net child benefit retained: £2,251.60
The £8,000 salary sacrifice produces:
- HICBC eliminated: £900.64 saved
- Income tax saved: £8,000 x 40% = £3,200
- Employee NI saved: £8,000 x 2% = £160
- Total benefit: £4,260.64 — and £8,000 goes into the pension
The effective cost of putting £8,000 into the pension is £3,739.36. The HICBC pension calculator runs this calculation for any salary and number of children.
For earners deeper into the taper — say £75,000 — the HICBC saving from a £15,000 contribution is proportionally larger, because more of the benefit is restored.
- ▸The HICBC threshold increased from £50,000 to £60,000 in April 2024, with the full clawback point rising to £80,000. The charge applies to the higher earner in the household. [HMRC]
- ▸Child benefit for 2025/26 is £26.05 per week for the eldest child and £17.25 per week for each additional child. [GOV.UK]
- ▸Pension contributions reduce adjusted net income for HICBC purposes, whether made via salary sacrifice or as personal contributions with tax relief. [HMRC]
This is factual information, not financial advice. If you're unsure what's right for your situation, speak to an FCA-regulated financial adviser.