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A toddler playing with wooden shapes and numbers | AccountingWEB | Pressure mounts on chancellor to scrap HICBC
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Pressure mounts on Chancellor Hunt to scrap the HICBC

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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.

2nd Feb 2024
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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 Once they reach £60,000, child benefit is entirely withdrawn via tax.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.

Pressure mounting

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:

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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Replies (85)

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Tornado
By Tornado
02nd Feb 2024 12:38

If my memory serves me well, this was a policy that was fast tracked through by the Coalition Liberal Party (not even waiting for the new tax year) as a [***]-for-tat retaliation for the Conservatives not agreeing to the boundary changes that the Liberals wanted, which would have been of some advantage to them.

Recollections may vary, but this was such unfair legislation and badly thought out, that I suspect the Liberals have lost many votes because of it. This has caused much distress to many people and has clearly cost HMRC a lot in time and resources and is particularly distasteful in difficult times.

Abolishing this charge NOW will be of great help to many people.

Thanks (2)
Replying to Tornado:
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By Markcairns67
07th Feb 2024 09:54

You're right, those evil Lib Dems innit. It's not like George Osborne would do anything nasty/stupid in the tax realm.

It's a shame that the following 6 Tory chancellors with a parliamentary majority couldn't do anything to correct this....

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By FactChecker
02nd Feb 2024 12:44

Right, now where did I last see that parapet? And what was it that they warned not to do apropos raising my head?

Anyway, this seems a very middle-class topic (hence the volume of publicity) when there are many other areas of equal 'unfairness' that hit the more vulnerable.

Ah, that was it ... don't make your head an easy target (too late)!

Thanks (6)
Replying to FactChecker:
Tornado
By Tornado
02nd Feb 2024 13:02

Working Class = You work for your income (that must be me then)
Middle Class = You work for some of your income and don't need to work for some income
Upper Class = You don't work for your income

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Replying to Tornado:
stonks
By WinterDragon
02nd Feb 2024 20:30

Unemployment for all, not just the rich. Lie flat and joint the antiwork revolution.

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Replying to Tornado:
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By Tomazaan
05th Feb 2024 10:31

This is completely off topic but I can't resist.
You equate class with sources of income: I don't agree. I think it is much more nuanced, difficult to define and is a combination of background, upbringing and attitude.

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Replying to Tomazaan:
Tornado
By Tornado
05th Feb 2024 12:18

This was what I was basically trying to illustrate. Classes are often used to put people into different categories but there is no way to define exactly what those categories are.

FactChecker suggested that this was a Middle Class topic but that actually means nothing to me.

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Replying to Tornado:
RLI
By lionofludesch
05th Feb 2024 18:09

Tornado wrote:

Working Class = You work for your income (that must be me then)
Middle Class = You work for some of your income and don't need to work for some income
Upper Class = You don't work for your income

MLAs were upper class until last week, then.

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Replying to lionofludesch:
Tornado
By Tornado
05th Feb 2024 18:23

One interesting observation that proves the point that you cannot categorise people by a Class system any more.

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Replying to FactChecker:
Ray McCann
By Ray McCann
02nd Feb 2024 14:19

Give an example of another more compelling in a tax context?

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Replying to RayM55:
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By FactChecker
02nd Feb 2024 19:17

What I actually said was "there are many other areas of equal 'unfairness' that hit the more vulnerable" ... a bit of a glib throwaway remark, but not the same as you'd now have me saying.
'Compelling' is, by definition, dependent on the perceptions and belief-base of the individual ... I'm sure there are things that would compel me which you'd happily ignore.

But, since you asked (and without a shred of documented evidence), I'm fairly sure that the number of people in the UK who would state the HICBC is 'unfair most of the time' ... would be greatly exceeded by the number stating that taxing Carer's Allowance (for instance) is 'unfair almost all of the time'.

I'm not saying that HICBC doesn't produce anomalies in certain circumstances (as do most of our tax laws from time to time). And I'll admit to my personal bias in that it seems a poor use of the country's fiscal resources to pay people on well over any version of average wages an incentive to have children.

But my point, if you bothered to read it instead of trying to score points, was that all the talk of the unfairness of HICBC is fuelled by the oxygen given the topic from a hybrid of political views that share one thing - the desire to look after their own class (rather than improve the lot of others).

Feel free to disagree - we all have opinions (and I did mention the dangers of heads and parapets) - but do you really believe there is NO greater inequality being inflicted on vulnerable people (which was my beef) through taxation than HICBC?

Thanks (6)
Replying to FactChecker:
Ray McCann
By Ray McCann
03rd Feb 2024 21:02

I am still waiting for an example? I don’t disagree with your point but the article is about the HICBC.

Thanks (1)
Replying to RayM55:
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By FactChecker
04th Feb 2024 00:59

You're "still waiting for an example" of what?

Your previous post rather peremptorily demanded of me:
"Give an example of another more compelling in a tax context?"
... so I did (and you say you "don’t disagree with my point").

Instead of making demands; maybe you could try explaining exactly what you disagreed with that I said AND setting out your reasons for why you are 'right'?
That would be what's called a conversation, which I prefer to a shouting match!

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Replying to FactChecker:
Ray McCann
By Ray McCann
06th Feb 2024 12:34

Who made demands, I simply asked you to give an example in a tax context. You referred to Carers Allowance, which is not really comparable since it is not a structural issue. That could simply be exempted, dealing with HICBC is much more complex unless they chose to simply abolish it.

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Replying to RayM55:
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By JamesDS
05th Feb 2024 11:21

I appreciate that this isn't tax-specific, but I think it has been well-established that the class you're in is most-easily identified by the time at which one opens their Christmas presents. The rule of thumb being, the earlier you open, the lower your class.

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Replying to JamesDS:
Ray McCann
By Ray McCann
06th Feb 2024 12:34

Okay!

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Replying to RayM55:
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By rmillaree
05th Feb 2024 15:58

its pretty obvious to me that anyone on materially lower income levels getting removal of other means tested benefits whilst at the same time getting taxed on earnings at minimum wage leevls will be equally affected.

Who needs the means tested benefit more somoneone on 25k - 15k 20k or 50k plus.

Peeps needs to face facts this is means tested beneift that peeps are only eligible for in full if they earn under 50k. Abolsutely zlich unfairness here in that they dont need then money like others do and they have more ability to take avoiding action if they dont want to hand back this means tested benefit.

The really poor off have ALWAYS had to deal with the harshness of fast remeoval of benefots - i completely get it when fact checked says this is teh equivalent of a middle class problem - dont like to bring class into it perosnally - but its comfortable peeps who dont really need this means tested benefit getting it.

If they have to pay it back they should just get on with the job of doing so.

Hey ho if the broken record peeps keep moaning enough they might get their way.

Thanks (3)
Replying to rmillaree:
Tornado
By Tornado
05th Feb 2024 16:20

Another reference to Middle Class, but I still don't know who the Middle Class are.

I was speaking to a Gas Engineer recently who was doing some work in the road near to us and he told me that he was being paid £40.00 per hour. I work out that on a normal working week of 40 hours for 47 weeks a year, he was up to around £75,000 per annum. Is he Working Class or is he Middle Class. By income definition he must be Middle Class but others might consider him to be Working Class.

Train Drivers are well paid, as we all know, so are they Middle Class or Working Class?

It doesn't particularly make any difference to me but I am bemused by reference to Class based on old fashioned perceptions.

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Replying to Tornado:
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By FactChecker
05th Feb 2024 17:09

OK, I'll admit it ... I was guilty of exactly the kind of sloppy shorthand on which I've been known to pull up other people!

Personally I dislike 'categorising' labels, because fortunately people are not all clones that can be fitted into a particular category. And 'class' can be one of the most pernicious of such labels - not just for the reasons of lack of clarity that you highlight, but because we've spent the best part of a century (since WW1 basically) slowly trying to dismantle the structures that supported it as a 'system'.

So why did I use the word?
TBH because I couldn't think of another term to make my point that wouldn't almost certainly offend far more readers.
I'd hoped that I could rely on most readers to detect what I was getting at ... in essence that those who've got the time to experience angst about a tax clawback should think about those whose concerns are about feeding their children and heating their flat (and not claim that HICBC is the greater iniquity).

Thanks (3)
Replying to FactChecker:
Tornado
By Tornado
05th Feb 2024 17:59

Hi FactChecker & rmillaree

Don't take it too seriously, I was teasing you both a bit but when you have clients that earn more than you do in jobs the were once considered 'Working Class' then you need to have different ways of describing people perhaps based on income or some other criteria.

For example, how do you categorise the endless stream of people applying to work at one of our client Restaurants who do not want a full time job and want to work no more than 16 hours a week. Presumably this gives them access to a range of benefits so they don't actually have to work full time. This is not what my client wants, they would much prefer full time employees, but simply cannot find them. Are these people 'Working Class'?

This is a complex matter and I don't have an answer but the first thing to do is dump the out of date notion of "Class".

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Replying to Tornado:
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By rmillaree
06th Feb 2024 09:06

Facts are by standards that applied when we grew up (despite being under 55 i had tin bath placed infront of coal fireplace and outside toilet when i was a young un) - i would say the entire nation is now practicably speaking middle to upper class lifestyle wise nowadays (some may not act like it i grant you) . Take 90% of the moaning peeps back to 70's style living for 12 months solid and they would perhaps shut up and realise life aint so bad however tough it is.

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Replying to Tornado:
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By rmillaree
05th Feb 2024 17:29

I dont really like to bring class into it as i said , so replace middle clas with comfortably off from my viepwoint - someone on 75k earnings per year doesnt really need this means tested benefit imho.

Note the average uk salary is 35k (median salary is only 29k) - so anyone earning 50k plus is clearly doing massively better than average so deffo in the middle to upper echelon of earners- probably the new "middle class" if we say "class" doesnt actually come into it anymore (rightly so)

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By Justin Bryant
02nd Feb 2024 12:47

I don't see the problem. Indeed, I find they're better than most other banks.

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By usedbyhmrc
02nd Feb 2024 14:29

Wondering if someone could answer this scenario.

Couple have a child aged about 5 years.
Highest earner ANI is £55,000 - so they would be paying back 50%.

They opted to stop receiving CHB after 6 months in the year.

Would they still be required to complete SA and pay back 50% of what they received, or because they have have only received 50% of the CHB they were entitled to over the year they wouldn't be subject to any payback.

I could never work out whether it's an annual charge or a paid period charge.

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Replying to usedbyhmrc:
Stepurhan
By stepurhan
02nd Feb 2024 15:01

It's based on the amount received.

The legislation refers to the amount an individual is "entitled" to. This has been interpreted as entitlement being based on having claimed it. I cannot see anyone arguing they want to pay a full year's charge because they were entitled to child benefit even though they didn't claim any.

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RLI
By lionofludesch
02nd Feb 2024 18:02

I just think it's poorly thought out legislation, if indeed it was thought out.

Lots of anomalies, potentially huge marginal rates, possibly over 100%, at relatively low income levels, unfair discrimination against single earners (who are already losing one personal allowance).

I'm not wholly against the principle of means testing these benefits but, jeez, it could've been done better.

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Replying to lionofludesch:
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By GDavidson
05th Feb 2024 10:31

"Relatively low incomes"? What planet are you on (or maybe you just live in the Home Counties)?

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Replying to GDavidson:
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By Mr_awol
06th Feb 2024 17:31

Minimum wage for a 'typical' 40 hour week (maybe not in our profession but it was used in the gasman example above) is about £22k. HICBC kicks in at 'about' 2 x minimum wage.

£50k isnt low - but lion did say 'relatively' low - which i would agree with TBH. It's hardly 'high' income these days either. Minimum wage applies across the board but naturally that includes those young trainees just starting out with no experience. Plus, you're right. £50k round here is next to nothing if you have nursery fees and/or a part time spouse

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Replying to Mr_awol:
RLI
By lionofludesch
06th Feb 2024 17:57

Mr_awol wrote:

£50k isnt low - but lion did say 'relatively' low - which i would agree with TBH. It's hardly 'high' income these days either.

I'll give an example of a client of mine from five years ago. Three kids - his marginal rate on income between £50,000 and £60,000 was 67%.

He didn't earn enough to be an additional rate taxpayer but, if he had been, his marginal rates would've been 32%, 67%, 42%, 62%, 42% and 47%. Tax NI and HICBC.

What sort of crazy progressive taxation system is that?

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Replying to lionofludesch:
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By rmillaree
06th Feb 2024 18:25

i agreed its not progressive in any manner - but the whole point is that the hicbc isnt really a tax despite the name - its simply a mechanism to pay back the means tested benefits that one isnt/want eligible for - factor in that reality admit its not really tax and the fact someone earning over double the minimum wage chose to claim the benefit in the first place and it is what it is rather than being grossly unfair. would you rather they paid half back betwen 40k and 50k earnings and hald betwen 50k and 60k earnings anad have alower marginal rtae. sometime syhou have to set a line and say you dont really need the loody benefit sorry stop moaning.

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Replying to rmillaree:
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By Mr_awol
07th Feb 2024 10:30

I'm sorry it is a tax - the whole excuse they use about it not being based on family income is because that would be against the principles of independent taxation. Add to that the fact that the person earning the income may not, in fact, have 'chosen' to claim the benefit - their partner might have. They may or may not have even known about it (some couples being excessively secretive about their finances).

If it were a benefit, claimable by the family unit, as you suggest - then surely the family should consider their overall/total income before claiming it, and one of the inequalities would be automatically solved.

Thanks (1)
Replying to lionofludesch:
Danny Kent
By Viciuno
07th Feb 2024 10:06

Do your marginal rates take into account the "tax rebate" that they are getting when earning less than £50k?

As rmillaree says, it's not a tax. Its a clawback of benefits.

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Replying to Viciuno:
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By Mr_awol
07th Feb 2024 10:35

Viciuno wrote:

Do your marginal rates take into account the "tax rebate" that they are getting when earning less than £50k?

As rmillaree says, it's not a tax. Its a clawback of benefits.

I think you misunderstand (or are misrepresenting) the HICBC. They don't get a rebate, they claim a universal benefit which is not means tested. They dont stop receiving that benefit or pay it back (otherwise they might also expect to lose the associated NI credits etc) - they incur a tax charge equivalent to the amount of benefit received or claim the benefit and choose not to receive the cash. This is very different to claiming a benefit one isnt entitled to, and having the claim cancelled thus repaying the proceeds.

You may prefer to see it as recovery of benefits but that isnt what is happening at all. FA2012 S8 Sch 1 (1 - 3) are pretty unambiguous on what it is (capitals are my emphasis):

1.Section 8 and Schedule 1 impose a new INCOME TAX CHARGE on taxpayers whose adjusted net income exceeds £50,000 in a tax year and who are in receipt of child benefit, and to taxpayers whose adjusted net income exceeds £50,000 and whose partner is in receipt of child benefit. In the event that both partners have an adjusted net income that exceeds £50,000, the charge will apply only to the partner with the highest income.

2.The amount of the charge will be 1 per cent of the amount of child benefit for every £100 of income above £50,000. The charge will be on the full amount of child benefit where the individual’s adjusted net income exceeds £60,000.

3.The charge will be called the high income child benefit charge and will come into effect from 7 January 2013

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Replying to Mr_awol:
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By rmillaree
07th Feb 2024 13:51

"they claim a universal benefit which is not means tested. "

surely if the mechanism to pay it back is based on taxable inmcome - its clearly means tested end of discussion ?? - if they earn over 60k they pay back exactly what was claimed- whether its repaid via tax charge or not via tax charge - its 100% clear that it is the actual benefit claimed being repaid practicably speaking however much the legislatoion tries to call it soemthing else.

So technicaly you are probably 100% right here but lets not deny a spade is a spade with what is going on.

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Replying to rmillaree:
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By Mr_awol
07th Feb 2024 14:10

I'm still not in agreement TBH. It isn't means tested, otherwise their claim would be rejected.

It is a benefit that is claimable by one of the parents as a representative of the family unit.

One member of that family unit may incur an income tax charge, calculated with reference to the benefit claimed (which may or may not be the representative claimant, and may change from one year to another)

The only correlation between the Child Benefit and the tax charge is that the amount of the tax charge is calculated with reference to, and capped at, the amount of benefit claimed. They are, however, two very different items administered via two separate mechanisms so whilst the 'only' correlating factor is a pretty big one, I would say this is a tax on the payer, plain and simple.

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Replying to Mr_awol:
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By rmillaree
07th Feb 2024 15:00

I'm still not in agreement TBH. It isn't means tested, otherwise their claim would be rejected.

I cant dispute your logic year are technically correct here so my viewpoint is clearly very biased - i just see the spade as being a spade

taking up your point though - was tax credit a means tested benefit - that is dished out based on uknown income levels and adjusted at year end of the year - so provisional claims were clawed back later on

"The only correlation between the Child Benefit and the tax charge is that the amount of the tax charge is calculated with reference to, and capped at, the amount of benefit claimed. They are, however, two very different items administered via two separate mechanisms so whilst the 'only' correlating factor is a pretty big one, I would say this is a tax on the payer, plain and simple."

you have lost me here - there is almost 100% correlation between amount paid back and adjusted taxable income levels - this being the case are you denying the calculation of the tax is "means tested"? surely not as the tax charge is 100% derived from income levels ?

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Replying to rmillaree:
RLI
By lionofludesch
07th Feb 2024 17:01

rmillaree wrote:

taking up your point though - was tax credit a means tested benefit - that is dished out based on uknown income levels and adjusted at year end of the year - so provisional claims were clawed back later on

Is this the ill-fated 2001-2003 version of Child Tax Credit? That certainly was means tested. If you didn't earn enough to pay tax, you didn't get a penny.

I'd have been ashamed to propose that legislation to Parliament.

I'd have been even more ashamed that it wasn't repealed in 2002.

What were they thinking?

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Replying to rmillaree:
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By Mr_awol
08th Feb 2024 13:01

rmillaree wrote:

you have lost me here - there is almost 100% correlation between amount paid back and adjusted taxable income levels - this being the case are you denying the calculation of the tax is "means tested"? surely not as the tax charge is 100% derived from income levels ?

Maybe poor wording on my part, but i cant think of another way of describing the connection between Child Benefit (a benefit) and the HICBC (a tax).

The former, as i say, is not means tested. A claimant can make an eligible claim regardless of income, and will receive the cash and non-cash benefits which accompany a valid claim. If they claim 'too much' (not sure how - perhaps if a 17 year old in approved education and as such still being paid for, leaves said education and becomes ineligible) then the benefit may be clawed back/recovered. The HICBC does not deal with such genuine overpayments though.

The latter is an Income Tax Charge (per legislation which is calculated by reference to the former. It is not a clawback of an overpayment - and of course there are no interest charges, penalties, or other sanctions which could arise from claiming a benefit to which one were not entitled. It does not affect any non-cash benefits which might have arisen from the original claim.

Indeed it is perfectly acceptable should one wish to claim the CHB in full and pay over the HICBC as required by law. The net cashflow effect will be nil, but nothing else indicates a revision to the original claim for benefit which remains very much NOT means tested.

I think in fact you are simplifying the issue and effectively calling a shovel a spade. Technically (and in reality) it isn't, but for convenience it may be easier to describe it as so. It may even be the case that a form of means-testing was the intention of the charge, but therein lies the argument about the unfairness of it all. If they HAD means-tested it, we wouldn't have the [***] show we now have to endure whereby one person's taxes can be affected by another person's behaviour and/or income.

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Replying to Mr_awol:
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By rmillaree
08th Feb 2024 15:57

The latter is an Income Tax Charge (per legislation which is calculated by reference to the former. It is not a clawback of an overpayment - and of course there are no interest charges, penalties, or other sanctions which could arise from claiming a benefit to which one were not entitled. It does not affect any non-cash benefits which might have arisen from the original claim.

i agree you are right as far as the way legilsation is worded

in all practical matters for lay person looking at it if you receive child benefit and you earn over 60k you pay all then benefit you have had back. Ok its paid via "tax charge" rather tahn writing out cheque to child benefit agency - but the benfit you have had is most certainly "means tested" in that if you earn 60k you pay it all back if you have claimed. the confusion here is that the repayment mechanism uses teh word "tax" - it should really have been labelled "deduction" like student loan or child benefit repayment.
We are going round in circles here though as i am 100% agreing with your technical description that this is a tax

if you look at the first google search for child benefit means test it says

"Child Benefit is not means tested in the normal sense"

thats probably the best apt descrption that hopefully we can both agree on and move on - although its officially not a means tested benefit - the repayment calculations work in almost exactly the same manner as some means tested benefits ie tax credits -

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Replying to rmillaree:
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By Mr_awol
09th Feb 2024 13:32

I agree the difference is subtle, and that we've probably gone as far as we can without repeating previous comments. In fact i thought I'd put the same, but must have taken that bit out at some point as i dont see it now.

I even agree that the calculations work in almost the same manner as some means testing (albeit i wouldn't go so far as to say almost exactly).

I think the main difference is that i view means-testing based on income of the claimant(s) based on family income levels to be a world apart from taxing one party based on their sole income for the actions of another party which they may or may not have been involved in, or know about. It's be like taxing me more because my wife doesn't earn enough to pay her Student Loan back (shhh, dont give them ideas!).

Overall i have issue with the unfairness of the stagnation of the threshold and the 1/2 earner inequality, and taking on liability for the actions of another (albeit connected party) rather than the concept of withdrawing a benefit via genuine means-testing. It further irks me when they try to justify the taxing of one party on the actions of another by claiming that is 'supported' by the principles of independent taxation when in fact it completely goes against it.

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Replying to Mr_awol:
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By rmillaree
09th Feb 2024 14:39

facts are these 2 people are one household - whether they claw back money from both parties equally or 1 party as an individual is irrelevant - that household needs to take reponsibility for that "means tested" claim they have made - if they aint entitled it gets paid back - thats simples both parties know that at the start and need to take repsonsibility for that.

imho none of these peeps earning 50k needed the money in the first place so i see zero unfairness if they lose it - so they should so that l;ower earners than them are paying fro it.

- it might seem unfair if neighbour is claiming and they dont if they have 2 earnings 40k pa - there is always going to be those swings and roundabouts though in the system.

" It further irks me when they try to justify the taxing of one party on the actions of another by claiming that is 'supported' by the principles of independent taxation when in fact it completely goes against it."

If you stop looking at it as a tax and look at it as a means tested benefit which it is in all but name then that makes this irk go away - it aint reallya tax despite being called that.

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Replying to rmillaree:
Tornado
By Tornado
09th Feb 2024 15:37

If you stop looking at it as a tax and look at it as a means tested benefit which it is in all but name then that makes this irk go away - it aint really a tax despite being called that.

Interesting view, but it is a tax and is assessed and collected as a tax.

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Replying to Tornado:
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By rmillaree
09th Feb 2024 16:27

that fact doesnt alter the fact that they claim benefit and pay it back or % of it back if income over 50k - in that respect it works in exactly the same manner as other means tested benefits like tax credit. the fact its called a tax doesnt alter the fact that you most certainly are paying back the benefit you claimed.

I claim £1500 i pay back 1£1500 via tax charge its nonsensical to suggest the 2 items are not directly related and that you are not paying back the money you claimed - you most certainly are imho despite the name.

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Replying to rmillaree:
Tornado
By Tornado
09th Feb 2024 17:26

Two Points

1) If the full benefit is claimed but the relevant person's income is between £50,000 and £60,000, then the tax charge will be lower than the amount of benefit that has been received, and the person paying the tax may not be the person that the benefit was paid to.

2) There is a choice of claiming the benefit and having to pay tax on it but benefitting from State Pension contributions paid for you, or not claiming the benefit and not getting State Pension Contributions paid for you.

A choice yes, but hardly a fair one.

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Replying to Tornado:
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By FactChecker
11th Feb 2024 13:36

AFAIK (re your point 2) you can actually:
* claim the benefit but opt not to be paid it!

Sounds nonsensical, but it's designed to get round exactly the problem you mention ... as no 'tax/benefit' clawback, but your SP contributions *are* credited.

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Replying to Viciuno:
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By lionofludesch
07th Feb 2024 10:56

Viciuno wrote:

Do your marginal rates take into account the "tax rebate" that they are getting when earning less than £50k?

As rmillaree says, it's not a tax. Its a clawback of benefits.

It is a tax. It's deliberately been legislated as a tax so that existing penalty and interest legislation can be used.

What tax rebate?

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By PennyPincher
03rd Feb 2024 08:06

In my simple mind I always think abolishing or increasing the rate would surely increase the tax take?

My scenario £50k income with an EoY bonus. If I receive a £10k bonus it goes straight in to my pension now as I’d pay 41% tax 2% NI and then pay back CB of about £1800 and I’m sure there are many others in the same position.

How many people would decide to take the bonus and accept the 43% tax if the CB was not repaid? Therefore HMrC get £4300 in tax that they would not have got before so net gain of £2500 tax (4300-1800 CB not paid back) and that’s before taking in to consideration the money will likely be used to buy items and generate further tax and vat down the line.

Is that too simple am I missing something?

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Replying to PennyPincher:
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By NotAnAccountant2
05th Feb 2024 16:01

PennyPincher wrote:

In my simple mind I always think abolishing or increasing the rate would surely increase the tax take?


The costs of administering the bizarrely complicated system probably exceeds the tax that is clawed back.

Far, far better to have a non-means tested benefit and then "claw it back" via tax rates.

If you think there shouldn't be a special allowance for people with children, or it should be more, or it should be less, then fair enough but do away with the means testing and save everybody a headache.

I suspect HICBC hasn't quite done what the government hoped. Historically, means tested benefits have been aimed at the very poorest, and so there's believed to be a significant number of eligible claimants who don't claim, either through ignorance or pride. Whether this offsets to costs of administering the system is hard to know. But HICBC was a universal benefit that now targets higher earners, so everybody used to claim it and now people who know how to complain are getting caught out.

I guess the next thing to taper is pensions. Surely can't be long now and then yet more complexity and cost administering something that should just work.

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By sammerchant
05th Feb 2024 09:45

This is what comes of letting financially illiterate people pass tax laws that are patently unjust - George Osborne has a 2:1 in Modern History - and walk away from the consequences.

The principles of good taxation were formulated many years ago. In The Wealth of Nations (1776), Adam Smith argued that taxation should follow the four principles of fairness, certainty, convenience and efficiency. Fairness, in that taxation, should be compatible with taxpayers’ conditions, including their ability to pay in line with personal and family needs.

This is patently unfair and has been so from inception.

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By AndrewV12
05th Feb 2024 09:55

'Scrap it entirely'

It will not be scrapped entirely, it will be tinkered with and if it was not an election year it would not be looked at all.

It all depends on the tax due received in Jan 2024, normally its a little more than the chancellor budgets.

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