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High Income Child Benefit Charge HICBC – progress and more to come |AccountingWEB |child with a piggy bank
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Chancellor raises high-income child benefit charge threshold with more changes to come

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Budget 2024 announced increases to the high-income child benefit charge thresholds from April 2024, with consultation to come on wider reforms. ATT technical officer David Wright takes a look at today’s announcement and recaps what prompted the Chancellor to take action.

6th Mar 2024
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The Chancellor announced today that the high-income child benefit charge (HICBC) threshold will rise to £60,000 from April 2024, with full clawback of child benefit only occurring for those with incomes of £80,000 or more. This is welcome, as the changes follow years of representations by stakeholders, including the ATT and successive AccountingWEB tax editors Rebecca Cave and Amy Chin that the thresholds were overdue for revision.

But the point at which the charge kicks in is not the only issue with the HICBC. The Chancellor committed today to consult on basing the HICBC on household income rather than individual income from April 2026. We’ll have to wait for the details of those plans, but the basis of assessment is not the only HICBC headache that exists. First, let’s look at a brief history of this unpopular policy.

A brief history of the HICBC

What we now know as the HICBC was first seen in the Spending Review published in October 2010, which proposed withdrawing child benefit from families with a higher rate taxpayer.

The HICBC was introduced with effect from 7 January 2013, and applied to households where one person’s adjusted net income was more than £50,000. At that time, the higher rate tax threshold was £42,475, so the new measure only affected higher rate taxpayers – just as the policy had intended.

By 2021/22, inflationary increases in the personal allowance and higher rate income tax threshold meant that higher rate tax became payable from £50,271 of income, so basic rate taxpayers found themselves within the scope of the HICBC for the first time. Freezes to the personal allowance and higher rate tax threshold followed soon after, eventually being extended through to 5 April 2028.

Meanwhile, the HICBC threshold has remained stubbornly at £50,000 since it was introduced. Combined with recent wage inflation, more taxpayers, including those paying the basic rate, have had to deal with the HICBC, or work out whether they’d rather opt out of receiving child benefit payments. So, until today, the intentions of the 2010 spending review measure appeared to have been forgotten.

What was announced at the Spring Budget?

The Chancellor announced in his Budget that the HICBC threshold will be increased to £60,000 with effect from 6 April 2024, with child benefit fully withdrawn by the time income reaches £80,000. This means basic rate taxpayers will no longer have to file Self-Assessment returns each year purely to pay the HICBC.

While the threshold increase does not fully account for inflation since the HICBC was introduced, it is nonetheless a welcome acknowledgement that the measure had become outdated and was not achieving its original objective.

More to come

A fundamental inequality of the policy remains though – at least for the next couple of years. From April 2024, a single-parent earning £80,000 will repay all the child benefit received each year, whilst a two-parent household where each earns £60,000 will not be affected by HICBC at all.

Mr Hunt acknowledged this uncomfortable truth today, and announced a consultation on measures to address it, which are to be implemented from April 2026. It would be a brave Chancellor who dabbles with the principle of independent taxation, but it appears this unfairness in how the HICBC applies is forcing Mr Hunt to act.

All’s well that ends well?

The changes and future proposals concerning the HICBC announced today are to be welcomed as resolving some of the issues with the measure. However, it remains a rather blunt tool, which many taxpayers are either unaware of or do not fully understand. The frequent appearances of HICBC cases at the tax tribunals over the past decade is proof of this.

Complexities will still arise where adjustable net income fluctuates, either due to variations in income (eg employment bonuses, job changes or peaks and troughs in work for the self-employed) or as a result of ad-hoc reliefs such as personal pension contributions and Gift Aid donations. Family circumstances such as moving in with a new partner, or the breakdown of a relationship can further complicate matters.

We are also still waiting for details of an administrative simplification for PAYE taxpayers affected by HICBC which was first mentioned at ‘L-Day’ last year. The proposal was to simplify how taxpayers affected by the HICBC, but whose tax affairs are otherwise straightforward, could pay the charge without needing to file tax returns each year. Given recent moves to remove high-income taxpayers with ‘simple’ tax affairs (broadly PAYE income only) from self assessment, it is surprising no specific details of this proposal have been revealed.

The ATT’s Emma Rawson will be at the Festival of Accounting & Bookkeeping at the Birmingham NEC 13–14 March where you can join the debate on the topic of HICBC and other Budget announcements. Book your free ticket today.

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Replies (7)

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By NotAnAccountant2
06th Mar 2024 16:29

"which are to be implemented from April 2026"

So just at the point that MTDfIT goes live, having never been tested before...

I can't find the comment I wrote but I predicted exactly this scenario where MTD, the MTD API, and all software, had to respond to politician's whims of changes which were done purely for political effect but made the software implementation difficult to impossible.

It's no longer as simple as "add an extra box to the tax return to include the spouses income" (or even their NINO)

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Replying to NotAnAccountant2:
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By philaccountant
07th Mar 2024 09:27

For what is effectively peanuts, it would be better to just scrap the clawback. The amount of cost to develop this system will be enormous and, more crucially, will it even work when it is finished?!

One for the Office of Tax Simplification, ironically now defunct.

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By Homeworker
06th Mar 2024 17:23

I presume HMRC already have the ability to check spouses income as they already do so when claims for the marriage allowance to be transferred are made?

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Replying to Homeworker:
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By Paul Crowley
06th Mar 2024 17:25

Lots are not married
This is impossible for HMRC to administer fairly

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By FactChecker
06th Mar 2024 17:30

I honestly don't understand why it is seen as verboten to "dabble with the principle of independent taxation" ... and, before anyone says otherwise, this is not a gender issue.

According to HMRC's guidance on HICBC, partner in terms of CB is defined as:
"someone you're not permanently separated from who you're married to, in a civil partnership with or living with as if you were."
And that's where all the complications arise ... with regard to intrusion, or indeed to accuracy and tracking changes!

Of course there's a much simpler answer (and this will cause howls) ... increase the 'pot' further to £100k, BUT also apply it 50:50 to the two individuals within any declared 'partner relationship' (which would have to be confirmed each year via a simple online declaration).
That way, the single mother (or father) would be treated equitably ... and the principle (if needed) of independent taxation would remain sacrosanct.

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By kellydarbs
06th Mar 2024 22:37

If this applies from April 2024, will people still have to pay the tax charge for 2022/23 and 2023/24, noting a self assessment has already been submitted for the former?

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By philaccountant
07th Mar 2024 09:34

Simpler idea: Make CB taxable, uplift it 20% from where it is now and pay it net of basic rate tax deduction.

Those on lower incomes may get an extra bit of cash injected once a year, which will be very welcome to them.

Those on higher incomes will no longer have a high marginal rate at whatever the taper threshold is. Everyone has skin in the game as everyone gets to keep some of the CB no matter their income.

Complexity is reduced as far as I can see. Though I've only spent 2 minutes thinking about it.

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