The High Income Child Benefit Charge (HICBC) was a tax charge announced back in 2012 by the then Chancellor George Osborne, with the intention of withdrawing Child Benefit on a sliding scale from families where the highest earner had income above a set threshold – then £50,000.
From 6 April 2024, the government has increased the HICBC threshold from £50,000 to £60,000.
The charge is still tapered, so if an individual, or their partner, earns between £60,000 and £80,000 it may still be worth their while financially to claim.
For those with an income between £60,000 and £80,000, the rate at which HICBC is charged is halved and will be calculated as 1% of the child benefit payment made for every £200 of income that exceeds £60,000. For individuals with income above £80,000, the charge is equal to the amount of the child benefit payment.
The amount of child benefit payable will be unaffected by these changes.
The changes affect individuals who have an income between £50,000 and £80,000 in a tax year and where they or their partner may be eligible to claim child benefit.
Couples can have a combined income of up to £120,000 and not be affected, as long as neither of them has an individual income of over £60,000.
It was recently reported that the number of families claiming child benefits stands at 6.91m with 390,000 liable for the high-income child benefit charge.*
The government says that the changes to the HICBC threshold will take an estimated 170,000 families out of paying the charge this year.
Families have two options regarding child benefit. One option is to claim child benefit and receive payments, paying any HICBC due at the end of each tax year through a self-assessment tax return. The other option is to register for child benefit but not claim it. This will ensure the family still get national insurance credits towards the state pension and other benefits should they need them.
Taxpayer Paul Brown recently won a tribunal against HMRC regarding the HICBC. Representing himself at the First Tier Tribunal, he succeeded in having discovery assessments and penalties worth £5,045 removed from his record. The lack of evidence from HMRC resulted in the tribunal judges ruling in favour of Brown.
Speaking of the changes, Head of Tax at Duncan & Toplis, Graeme Hills, commented
“I think the increase will be a welcome change to many working households. Of particular interest is the review of the charge applying to household income rather than either parent breaching the threshold. This has always been an unusual mechanism, creating unfairness between working families, so addressing this is a positive step. One has to wonder though how this marries up with the principle of independent taxation – a difficult course to navigate for those drawing up the legislation”.
To find out more about the changes to the HICBC threshold please get in touch with our team of experts today.
