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Taxation (UK) · Property and investment income

Personal Allowance and High Income Child Benefit Charge

Updated 11 October 2026 · Fact-checked

The personal allowance is £12,570. It falls by £1 for every £2 of adjusted net income over £100,000 and is nil at £125,140. The child benefit charge is 1% of the child benefit received for each full £200 of adjusted net income over £60,000, reaching 100% at £80,000.

Understand Personal Allowance and Child Benefit Charge

Every UK individual can have a personal allowance. It is the amount of income taxed at 0%. For the exam it is £12,570. You deduct it from net income to reach taxable income.

High earners lose it. The test uses adjusted net income (ANI), not total income. ANI is net income less the gross amount of Gift Aid donations and the gross amount of personal pension contributions paid under relief at source. Net income is total income less reliefs such as trading losses. If ANI is £100,000 or less, you keep the full allowance. Above that, the allowance falls by £1 for every £2 of excess. When ANI reaches £125,140 the allowance is nil.

This creates a band of income from £100,000 to £125,140 with an effective marginal rate of 60%. Each extra £1 is taxed at 40%, and it also removes 50p of allowance, which costs another 20p of tax. Gift Aid and pension contributions reduce ANI, so they can win back some or all of the allowance. That makes them popular planning points.

The high income child benefit charge is a separate income tax charge. It applies when someone with ANI over £60,000 receives child benefit, or their partner does. The person with the higher ANI is the one charged. The charge is 1% of the child benefit received for every £200 of ANI over £60,000. At £80,000 or more, the whole benefit is clawed back. The charge is added to the income tax liability. It is not a deduction in the income tax computation.

The question will give you the amount of child benefit. You do not need to remember rates of child benefit.

Key rules to remember

Adjusted net income
ANI = net income − gross Gift Aid donations − gross personal pension contributions (relief at source)
Use ANI for both the allowance reduction and the child benefit charge. Net pay pension contributions are already deducted in arriving at employment income.
Personal allowance
£12,570
Given in the tax tables. Full allowance if ANI is £100,000 or less.
Allowance reduction
Reduction = (ANI − £100,000) ÷ 2
The allowance is nil when ANI is £125,140 or more. Never let the allowance go below zero.
Child benefit charge
Charge = child benefit received × (1% × number of whole £200 of ANI over £60,000)
Ignore any part of £200. At £80,000 or more the percentage is 100%, so the charge equals the benefit.
Gross up a Gift Aid gift
Gross = net paid × 100 ÷ 80
Gift Aid gifts and relief at source pensions are paid net of basic rate tax. Use the gross figure to reduce ANI.

How to solve Personal Allowance and Child Benefit Charge questions

Use this order for any question on the allowance or the child benefit charge.

  1. 1List all income and work out net income. Deduct any reliefs given against total income, such as trading losses.
  2. 2Gross up any Gift Aid donations and relief at source pension contributions. Deduct the gross amounts to find ANI.
  3. 3Compare ANI with £100,000. If it is higher, deduct half the excess from £12,570. Floor the allowance at nil.
  4. 4Compute taxable income: net income less the reduced personal allowance. Then apply the bands, and extend the basic rate band by the gross Gift Aid and pension amounts.
  5. 5For child benefit, check whether ANI is over £60,000. If it is, count the whole £200 units over £60,000. Each unit is 1% of the benefit.
  6. 6Cap the percentage at 100%. Multiply by the child benefit received in the tax year and add the charge to the tax liability.
  7. 7State which person is liable. It is the one with the higher ANI, not necessarily the one who claims.

Quickest way: Quick ANI shortcut

When to use it: Use it when the question asks only for the allowance or only for the child benefit charge, not a full computation.

  1. Write ANI in one line: net income minus gross donations and gross pension contributions.
  2. Allowance: (ANI − 100,000) ÷ 2, then 12,570 minus that figure. If ANI is £125,140 or more, write nil.
  3. Child benefit: (ANI − 60,000) ÷ 200, drop the decimals, and treat the result as a percentage. Multiply by the benefit.
  4. Sense check: at ANI of £80,000 or more your answer must equal the full benefit.

Common mistakes in Personal Allowance and Child Benefit Charge

  • Using total income instead of adjusted net income.

    Students see £100,000 or £60,000 and compare it with the salary without adjusting.

    Fix: Always compute ANI first. Deduct gross Gift Aid and gross relief at source pension contributions.

  • Deducting the net Gift Aid or pension payment from ANI.

    The question gives the amount actually paid, and students use it as it stands.

    Fix: Gross it up by × 100 ÷ 80 before deducting it.

  • Reducing the allowance by £1 for every £1 over £100,000.

    The two thresholds are remembered but the 'one for every two' ratio is forgotten.

    Fix: Halve the excess. Check that the allowance reaches nil at £125,140 (£25,140 ÷ 2 = £12,570).

  • Not rounding down in the child benefit charge, such as using 62.25%.

    The calculation is treated as a smooth percentage.

    Fix: Only whole £200 units of excess count. Use 62%, not 62.25%.

  • Deducting the child benefit charge in the income tax computation or applying it to the wrong person.

    Students confuse it with a relief or assume the claimant pays.

    Fix: Add it to the tax liability after the bands are applied. The person with the higher ANI is charged.

  • Forgetting to extend the basic rate band for gross Gift Aid and pension payments.

    Students focus on ANI and stop there.

    Fix: Add the gross payments to the £37,700 basic rate band when computing the tax. ANI is only for the allowance and the child benefit test.

Worked examples

Example 1

Ravi has employment income of £110,000 for 2025/26 and no other income. He makes no Gift Aid donations or pension contributions. Calculate his income tax liability.

Show the solution
  1. Net income and ANI are both £110,000.
  2. ANI exceeds £100,000 by £10,000. Reduction in allowance = £10,000 ÷ 2 = £5,000.
  3. Personal allowance = £12,570 − £5,000 = £7,570.
  4. Taxable income = £110,000 − £7,570 = £102,430.
  5. Basic rate: £37,700 × 20% = £7,540.
  6. Higher rate: (£102,430 − £37,700) = £64,730 × 40% = £25,892.
  7. Total income tax = £7,540 + £25,892 = £33,432.

Answer: Ravi's income tax liability is £33,432.

Example 2

Meera has employment income of £75,000. She paid a Gift Aid donation of £8,000 (net). Her partner has lower income. Meera received child benefit of £3,000 in the tax year. Calculate the high income child benefit charge.

Show the solution
  1. Gross the donation: £8,000 × 100 ÷ 80 = £10,000.
  2. ANI = £75,000 − £10,000 = £65,000.
  3. ANI exceeds £60,000 by £5,000.
  4. Number of whole £200 units = £5,000 ÷ 200 = 25.
  5. Percentage charged = 25 × 1% = 25%.
  6. Charge = £3,000 × 25% = £750.
  7. Meera has the higher ANI, so she is liable. The charge is added to her income tax liability.

Answer: The child benefit charge is £750.

Exam tips

  • In objective test questions the first step is nearly always ANI. Do that calculation before anything else, because one wrong input makes the whole answer zero.
  • Learn the three limits as a set: £60,000 and £80,000 for child benefit, and £100,000 and £125,140 for the allowance. Write them on your scrap paper at the start.
  • If a question gives Gift Aid or pension payments to someone near £100,000 or £60,000, expect the answer to hinge on ANI falling below the threshold.
  • In constructed response questions, show the ANI working and the allowance reduction on separate lines. Method marks are given even if the final figure is wrong.
  • Remember the 60% effective rate between £100,000 and £125,140. It often appears in tax planning requirements.

Practice questions from Property and investment income

Personal Allowance and Child Benefit Charge in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Personal Allowance and Child Benefit Charge: frequently asked questions

How is the personal allowance reduced over £100,000?

It is reduced by £1 for every £2 of adjusted net income over £100,000. At £125,140 or more the allowance is nil. The reduction cannot take it below zero.

What is adjusted net income in TX-UK?

It is net income less the gross amount of Gift Aid donations and the gross amount of personal pension contributions paid under relief at source. It is used to test both the personal allowance reduction and the child benefit charge.

How do I calculate the high income child benefit charge?

Take ANI over £60,000 and count the whole £200 units in it. Each unit is 1% of the child benefit received. Multiply that percentage by the benefit. At £80,000 or more the whole benefit is charged.

Who pays the child benefit charge?

The person with the higher adjusted net income pays it if their ANI is over £60,000. This applies whether or not that person actually receives the child benefit. The charge is added to their income tax liability.