Save content
Have you found this content useful? Use the button above to save it to your profile.
Child telling the time AccountingWEB It’s time to claim or restart HICBC payments
istock_child-telling-the-time_K-Neville

It’s time to claim or restart HICBC payments

by

Up to 485,000 families could be better off thanks to uprated high income child benefit charge thresholds. ATT technical officer, David Wright, takes a look at who’s affected, and what they might need to do now.

19th Apr 2024
Save content
Have you found this content useful? Use the button above to save it to your profile.

At last month’s Spring Budget, the Chancellor announced changes to the high income child benefit charge (HICBC). 

These measures are expected to save 170,000 families from having to deal with this perennially unpopular part of the tax system, and allow 135,000 families to keep more of the child benefit they receive each year. 

A further 180,000 families could now be missing out on valuable financial support having either opted out of payments to avoid the HICBC or never having claimed child benefit at all.

HICBC history

The HICBC was introduced during the 2012/13 tax year with the intention of “withdrawing child benefit from families with a higher rate taxpayer”.

To achieve this, the income threshold from which the HICBC applied was set at £50,000. Taxpayers affected by the HICBC had their child benefit clawed back at a rate of £1 for every £100 of income over the £50,000 threshold, meaning full clawback occurred once income hit £60,000.

Given the higher rate tax threshold in 2012/13 was £42,475, only higher rate taxpayers had to worry about the HICBC, so the policy worked as intended in that respect for the first few years. 

But following several years of inflationary increases to the personal allowance and higher rate income tax threshold, by 2021/22 higher rate tax became payable from £50,271 of income. Some basic rate taxpayers therefore found themselves within the scope of the HICBC for the first time. This situation continued until 6 April 2024.

What’s changed?

Following the Spring Budget announcement, from 6 April 2024 the HICBC only applies where the higher earning parent/guardian in a household has an adjusted net income of £60,000 or more. Basic rate taxpayers are once again safe from HICBC, but many higher rate taxpayers will be better off too.

The rate at which the HICBC claws back child benefit has also been halved. For the current tax year onwards, £1 of child benefit will be repayable for every £200 of income over the £60,000 threshold, so full clawback won’t apply until the higher earning parent or guardian’s income reaches £80,000.

These changes mean some parents and guardians who have previously opted out of child benefit payments rather than deal with the HICBC may be well advised to restart their payments. Families who have never claimed child benefit should also consider doing so.

Why claim child benefit?

Child benefit provides financial support to families – the rates for the current tax year are £25.60 per week for the first child, and £16.95 for each additional child.

Child benefit also provides entitlement to state pension credits until the youngest child is 12 years old, which is especially valuable if a parent or guardian has little or no income of their own. Claiming child benefit also means the child will automatically be issued with a national insurance number at age 16.

Let’s look at the implications of the Spring Budget changes for various income levels. It’s important to remember that the HICBC is payable by the higher earning parent/guardian in a household, who may not be the person receiving the child benefit payments. The figures below relate to the adjusted net income of the higher-earning parent/guardian.

Income between £50,000 and £60,000

Anyone with adjusted net income over £50,000 may previously have opted out of receiving child benefit payments to avoid dealing with the HICBC under the pre-April 2024 rules.

Thanks to the newly-increased HICBC threshold, as of 6 April 2024 those with adjusted net income of up to £60,000 would be well advised to restart their child benefit claim since HICBC will not apply to them at all, and they will be able to keep all the child benefit received each year.

Income between £60,000 and £80,000

For those with income between £60,000 and £80,000, restarting child benefit payments may still prove beneficial, as the reduced clawback rate means they will retain some of the child benefit received.

For instance, before 6 April 2024, a parent/guardian earning £70,000 in a household where child benefit is claimed would previously have had to repay all the child benefit received by their household each year. But under the new rules, they will only repay half the child benefit received, leaving them better off.

However, the higher earner will need to file self assessment tax returns each year to pay the HICBC.

Income over £80,000

From the 2024/25 tax year onwards, anyone with adjusted net income over £80,000 will have their child benefit clawed back in full. There is therefore no advantage to receiving the payments. However, rather than not claiming child benefit at all, it is generally advisable to claim the benefit but opt out of receiving payments. This avoids the need to deal with the HICBC, whilst retaining the benefits outlined above.

Never claimed child benefit before?

If a taxpayer does decide to claim for the first time, claims are automatically backdated by three months (or to the child’s date of birth if later).

Claims made in the current tax year (2024/25) will be treated as if they had been received this tax year, even if they include backdated payments which would have created a HICBC liability in the previous tax year. New claims for child benefit can be made online or via the HMRC App.

Replies (1)

Please login or register to join the discussion.

avatar
By Not Anonymous
19th Apr 2024 12:46

"From the 2024/25 tax year onwards, anyone with adjusted net income over £80,000 will have their child benefit clawed back in full"

Isn't it £80,000 or over??

Thanks (0)