Beneficial Changes to the High Income Child Benefit Charge

Since January 2013, individuals with income of more than £50,000 have been subject to the High Income Child Benefit Charge (HICBC) if they or their partner are in receipt of child benefit & they are the highest earner in the relationship.

The charge is levied at a rate of 1% of the child benefit for every £100 of income over £50,000. This means that an individual with income of £60,000 or more has to repay 100% of their child benefit.

For example, an individual with income of £55,000 has £5,000 of income over £50,000, or 50 x £100. So they would have to repay 50% of their child benefit.

Many households caught by the charge have taken the decision to opt out of child benefit payments. If an individual’s income drops so that they are no longer caught by the charge, the child benefit claim can be started again from the date their income reduced.

In the budget on 6 March 2024, the Chancellor announced that the lower threshold will be increased from £50,000 to £60,000. The calculation of the charge will also change to 2% for every £100 of income over the threshold.

For example, an individual with income of £65,000 will have £5,000 of income over £60,000, or 25 x £200. So they will have to repay £25% of their child benefit.

Under the new rules, an individual with income of £80,000 or more will have to repay 100% of their child benefit.

Action Points:

 

  • If you have previously opted out of child benefit payments because your income is more than £60,000, you may now wish to opt back in if you (& your partner if applicable) will have income of less than £80,000. This can be done here: https://www.gov.uk/child-benefit-tax-charge/restart-child-benefit
  • If you have a new baby, you should always make a claim for child benefit even if your income is more than £80,000. You can then opt out of receiving payments. This is so that you can benefit from National Insurance credits until your child reaches the age of 12. Having a claim in place also means that if your circumstances change your claim can be re-instated from the date of change. A new claim can only be backdated for a maximum of three months.