Pressure mounts on Chancellor Hunt to scrap the HICBCby
Just over a month away from what may well be Chancellor Jeremy Hunt’s final Budget and pressure is mounting on the government to address some of the most unfair elements of the current UK tax system, starting with the high-income child benefit charge.
The high income child benefit charge (HICBC, or "hick-bick") has been described as "a prime example of a tax barnacle" and a "legislative thorn that causes so much pain to many families" by tax expert Rebecca Cave; "a disincentive to work" and a "tax trap" by Tax Policy Associates founder Dan Neidle; and "perverse" by Conservative MP and chair of the Treasury Select Committee Harriet Baldwin.
Even Chancellor Hunt himself has admitted that there is an "unfairness" in the structure of the HICBC.
Fix the HICBC
If the higher earner in a couple - or the parent in single parent household - has adjusted net income of more than £50,000, their child benefit entitlement begins to be clawed back. Once they reach £60,000, child benefit is entirely withdrawn via tax.
The unfair consequence is that a couple where both partners have £49,000 each will receive the full child benefit, while a family where one parent has £60,000 and the other nothing, or where a single parent has £60,000, will receive nothing. This leaves single parent families and families with greater care responsibilities (for example) significantly worse off.
Taxpayers are required to self-assess their liability to the HICBC, and many do not realise they have been dragged into the charge meaning they are hit with unexpected penalties when they fail to pay.
If the Conservative party is paying the slightest attention to advice from experts, professional bodies, the voting public, or even its own advisers, the Chancellor cannot avoid at least tinkering with the HICBC in the March Spring Budget.
Pressure is piling on from all directions, with just a few examples here:
- The Association of Tax Technicians (ATT) submitted a representation to the Chancellor, calling for a review of the HICBC in the Spring Budget 2024;
- The issue was featured on Radio 4's Women's hour on 25 January with Harriet Baldwin and Tom Waters, associate director at the Institute for Fiscal Studies highlighting the unfairness of the charge.
- Dan Neidle published a damning report that demonstrates how the HICBC in its current guise can result in marginal tax rates of 71% or higher for certain families; and
- Martin Lewis has written to Jeremy Hunt following the Chancellor's appearance on The Martin Lewis Money Show Live on 9 January 2024. In the letter and on the show, Lewis cites the HICBC as "by far the biggest single topic the public asked me to raise with you".
Chancellor Hunt simply cannot ignore the barnacle this time, but what are his options?
Raise the threshold in line with inflation
When it was introduced in 2013, the HICBC was designed to affect only higher income taxpayers. The income tax higher rate of 40% applied to income above £34,470 in 2012-13. The HICBC clawback begins at £50,000, so only those in the higher tax bracket would be required to repay their child benefit.
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Consulting Tax Editor for AccountingWEB.
I have spent the last 10 years teaching the accountants of the future, mainly ICAEW advanced level corporate reporting. I also cover tax news and write and edit tax updates for other publishers including PTP Limited.