In 2013, the Government introduced the High Income Child Benefit Charge (HICBC) to claw back child benefit from higher-earning couples they felt were in less need of this non-taxable, non-means-tested state benefit ...
The right advice about your child benefit claim is essential!
Any income over £50,000 per year is classed as 'high income' for this purpose, so anyone with adjusted earnings of £60,000 or above has the entire amount of child benefit clawed back.
"This charge has always been controversial!"
HICBC depends on a good degree of information sharing between individuals in a relationship that isn't always automatic. This means that the person receiving the child benefit sometimes suffers the clawback.
The £50,000 to £60,000 thresholds haven't been increased since 2013, so it's become a bit of a stealth tax as more taxpayers cross the thresholds as wages rise over time.
However, it is simple to elect not to receive child benefit which means there's no need to report the HICBC on tax returns. Though there is an important distinction between electing not to receive it and not claiming it in the first place.
Claiming child benefit is important for non-working or low earning parents and guardians as it secures National Insurance credits for a child under 12 years old and they count towards the State Pension. So, not claiming child benefit because of the admin involved with HICBC can have longer-term consequences.
"Tick the right box on the claim form to opt-out of receiving the money!"
I've had a number of questions asked recently about the difference between opting out and not claiming and have advised a number of new parents who are also business owners where one is a higher earner.
With such a complex system, the right advice about your child benefit claim is essential.
Until next time ...
ROGER EDDOWES Business Godparent
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more about claiming child benefit as a high earner, it may be a great idea to give me a call on 01908 774320 and let's see how I can help.
Don't forget to stay updated with our daily social media posts on Facebook.
Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
No unauthorised use, duplication, distribution or modification to any original content contained within this blog is permitted without prior written permission of the author. All other trademarks and registered names are acknowledged.