Navigating the High Income Child Benefit Tax Charge
Child Benefit is relied upon by many families in the UK, 7.7million families were claiming it in August 2022 (reference). This blog aims to provide much needed information to these families, on how they may be impacted by the Child Benefit tax charge.
What is the High Income Child Benefit Tax Charge (HICBC):
The HICBC was introduced in January 2013, so it has been around for a while. It is a tax charge placed on certain families who receive Child Benefit. And it was designed to capture individuals earning more than a certain threshold.
How does it work?
For individuals or households, where either parent earns above £50,000 per year, the HICBC comes into play. For every £100 of income over £50,000, a 1% tax charge is applied, based on the child benefit received (by either parent). Once earnings exceed £60,000, effectively means all of the child benefit has been paid back in tax.
It is a very discreet tax, which is gaining more public attention recently.
Practical points to consider:
Families who receive child benefit need to be aware of the rules, the below are some helpful points to consider:
Continually monitor yours, and your partners income
If either of you earned over £50,000 in a tax year and either of you received child benefit in the same tax year, the highest earner will need to declare their income, and self assess the High Income Child Benefit charge to HMRC via submitting a tax return
It may be worthwhile speaking to an appropriate professional prior to any submission to HMRC. We would of course be happy to help anybody in this situation
It may also be worth opting out of receiving child benefit, if your income is likely to remain the same or increase
Summary
There are lots of parents, and professionals, who disagree with many aspects of the High Income Child Benefit Tax Charge, and there is mounting pressure on the Chancellor to scrap it in the next budget. So whilst the future for this tax charge is uncertain, until that changes, families need to be aware of how it works, and consider how it might impact them.
Contact us below, if you need more help:
Like all of our blogs, we aim to help make the world of tax more understandable to those it impacts. If one person reads this and feels they have learned something, we consider that a success. If this blog has helped you, please let us know by providing feedback below:
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