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Categories General Author Jon

Child Benefit and the High Income Child Benefit Charge

The High Income Child Benefit Charge (HICBC) applies where an individual or their partner receives Child Benefit, and their adjusted net income currently exceeds £60,000. The charge may also apply where another person claims Child Benefit for a child living with you and contributes at least an equal amount towards the child’s upkeep, regardless of whether the child is your own.

Adjusted net income is your total taxable income, including earnings, savings interest and dividends, calculated before the Personal Allowance and after deductions such as pension contributions and Gift Aid.

For the current 2026-27 tax year, if income is between £60,000 and £80,000, the charge is calculated at 1% of the total Child Benefit received for every £200 of income above £60,000. Once income reaches £80,000 or more, the charge equals the full amount of Child Benefit received.

Where both partners have income above the threshold, the charge is paid by the partner with the higher adjusted net income.

Taxpayers can choose to continue receiving Child Benefit and pay the charge or opt out of payments while still remaining registered. Opting out does not affect entitlement and preserves National Insurance credits, which can help build entitlement to the State Pension, and ensures a child can receive a National Insurance number automatically at age 16.

The charge can be paid through PAYE or self-assessment, although self-assessment is required where the taxpayer already files a return for other reasons or where payment is made after 31 January following the end of the tax year.

Source:HM Revenue & Customs | 28-06-2026
Categories Income Tax Author Jon

Avoid 60% Income Tax band

A ‘60% Income Tax band’ can arises when an individual’s income exceeds £100,000 in a tax year. Once this threshold is crossed, the personal allowance is gradually withdrawn at a rate of £1 for every £2 of adjusted net income above £100,000. As a result, the £12,570 tax-free allowance is fully removed once income reaches £125,140.

Where annual income falls in the bracket between £100,000 and £125,140, the effective marginal tax rate increases to 60%, as the withdrawal of the personal allowance creates an additional layer of tax on income within this band.

Adjusted net income is used by HMRC to determine entitlement to certain reliefs and thresholds. Adjusted net income is broadly total taxable income before personal allowances, less certain reliefs such as pension contributions, Gift Aid donations, and trading losses.

This issue can create a significant planning opportunity for individuals whose income is close to or within this range to reduce their tax bill. In some cases, it may be possible to reduce taxable income below £100,000 to preserve the full personal allowance. Common planning approaches include increasing pension contributions, making charitable donations, or using available investment reliefs where appropriate.

For higher and additional rate taxpayers, charitable giving can also be used to reduce taxable income. Donations made in the current tax year may, in certain circumstances, be carried back to the previous tax year, provided the claim is made on or before the submission of the relevant self-assessment return (typically by 31 January 2027 for the 2025–26 tax year).

Source:HM Revenue & Customs | 28-06-2026
Categories Income Tax Author Jon

Meaning of Carried Interest

Carried interest is essentially a share of the profits from an investment fund that is paid to the fund managers. Unlike a fixed fee, its value depends directly on the fund's performance. This type of payment is considered carried interest if it is a profit-related return and meets a specific "no significant risk" condition.

A payment is considered a profit-related return if three conditions are met: (1) it only arises when the fund makes profits over the relevant period or investments; (2) the amount varies substantially in line with those profits rather than being fixed; and (3) it is based on the same profits used to determine returns for external investors, not a separate manager-only pool.

In addition to these three conditions, the arrangements must also pass a "no significant risk" test. This test assesses the likelihood that the payment will actually be made. Its purpose is to ensure that any fixed or guaranteed performance fees are appropriately charged to income tax, rather than being treated as carried interest.

For fund managers and their advisers, these criteria are central to determining tax treatment. Carried interest will generally be treated as such where it is dependent on fund profits, varies materially with those profits, and is calculated by reference to the same profit pool as external investors, provided the “no significant risk” condition is also met. Where these tests are satisfied, the return is brought within the carried interest tax rules, with corresponding implications for how and when it is taxed.

Source:HM Revenue & Customs | 28-06-2026
Categories Construction Industry Scheme Author Jon

Construction Industry Scheme responsibilities

The Construction Industry Scheme (CIS) is used within the UK construction sector to help manage payments between contractors and subcontractors effectively. This scheme mandates that contractors deduct a portion of payments made to subcontractors, remitting these funds directly to HMRC. These deductions function as advance payments towards the subcontractor’s tax and National Insurance obligations.

A significant administrative update to the CIS scheme took effect from 6 April 2026. From this date, construction contractors are once again required to file a nil return for any month in which they have not paid subcontractors. This reinstatement of the nil filing obligation aims to prevent erroneous late filing penalties that previously arose when contractors did not make payments but also did not inform HMRC. Contractors are required to either file a nil return or notify HMRC in advance if they will not be making any subcontractor payments for a given month; failure to do so without a reasonable excuse could result in penalties.

For any business operating within the construction sector, whether based in the UK or abroad, a thorough understanding of the CIS regulations is important. Beyond mere compliance, accurate registration, precise deductions, and punctual submissions are fundamental to sound financial governance and crucial for avoiding potential penalties. 

Contractors are required to register for the scheme. While subcontractors are not required to register, a higher rate of deduction will be applied to their payments if they are unregistered. Registered contractors can use CIS online to file monthly returns or verify subcontractors.

Businesses must register as a contractor if they pay subcontractors for construction work, or if their business, despite not performing construction work itself, has spent over £3 million on construction in the 12 months since its first payment. Registration as a subcontractor is required if a business undertakes construction work for a contractor. If a business meets the criteria for both, it must register as both a contractor and a subcontractor.

Source:HM Revenue & Customs | 28-06-2026
Categories National Insurance Author Jon

Don’t forget to pay your Class 1A NICs

Employers are reminded that Class 1A National Insurance contributions (NICs) for the 2025–26 tax year must be paid by 19 July 2026 (or 22 July 2026 if paying electronically) to avoid penalties. These payments relate to the benefits in kind provided to employees and directors, and on Class 1A NICs on benefits, termination payments and sporting testimonial payments.

Class 1A NICs are payable on most taxable benefits in kind such as company cars, private medical insurance and other employment-related benefits provided to employees, directors, and their families or household members. 

They are also due on the taxable element of certain termination payments above £30,000, where Class 1 NICs have not already been paid. In addition, employers should note that Class 1A NICs may also apply to sporting testimonial and similar payments, depending on how they are treated under employment income rules.

To ensure payments are allocated correctly, employers must use their Accounts Office reference number and clearly identify the relevant tax year. Class 1A NICs paid in July will always relate to the preceding tax year.

The important dates to be aware of for 2025–26 Class 1A NICs are:

  • 6 July 2026 – Submission deadline for forms P11D and P11D(b)
  • 19 July 2026 – Deadline for postal payments to reach HMRC
  • 22 July 2026 – Deadline for electronic payments to clear HMRC’s bank account

Employers should ensure both reporting and payment obligations are met on time to avoid penalties and interest charges.

Source:HM Revenue & Customs | 28-06-2026
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