Significant Changes to High Income Child Benefit Charge
How it will affect your family ...
Posted by Roger Eddowes on 21/03/2024 @ 8:00AM
If you are a parent in the UK, you'll be familiar with child benefit, a government payment made to families with children under 16. However, the way in which child benefit is recovered from households has recently undergone significant changes ...
The complexity of the High Income Child Benefit Charge has been a concern since its introduction!
In his Spring Budget 2024 announcement, the Chancellor addressed a major issue with the High Income Child Benefit Charge (HICBC) – an anomaly that has favoured dual-income households over single-income households. This means that a couple with two incomes of up to £49,999 each would not be subject to the charge, while a couple or single person with one income of £50,000 or more would be.
To address this unfairness, the government has announced plans to move to a household-based system for recovering child benefit by April 2026!
This means that instead of targeting the higher earner in a household, the charge will be based on the combined income of the household. This change aims to create a fairer system for all families, regardless of their income structure.
While this is a welcome change, it also presents challenges for HMRC. The tax authority will need to collect additional data on household income and make significant changes to its systems and processes. This could put a strain on HMRC's limited resources and may result in delays or errors in the recovery of child benefit.
"In the meantime, an interim measure has been put in place!"
From the 6th of April 2024, the HICBC adjusted net income threshold will increase to £60,000. This means that individuals with income between £60,000 and £80,000 will only have to pay half the rate of the charge, while those with income above £80,000 will have to pay the full amount of the child benefit payment.
It's important to note that these changes will only apply to child benefit claims made after the 6th of April 2024. Backdated payments will be treated as if they were made in the 2024/25 tax year, if backdating would result in a HICBC liability in 2023/24. This means that some families may benefit from waiting until the 6th of April to make a claim for child benefit.
If you are currently receiving child benefit, it's important to understand how these changes will impact your household income. The new reforms may mean that you will be subject to a higher charge or that you will no longer be eligible for child benefit at all. It's crucial to plan ahead and make any necessary adjustments to your budget to account for these changes.
The Government has also announced plans to collect HICBC without requiring a self-assessment tax return, but no implementation date has been set. This means that HMRC will be relying on other methods to collect the charge, which could lead to more contact and potential confusion for families.
"The complexity of the HICBC has been a concern for many since its introduction!"
While the changes announced by the government aim to address some of these issues, it would be more beneficial to remove the charge altogether and find alternative ways to recover child benefit.
Stay informed about the changes to the High Income Child Benefit Charge as it may affect you.
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 the High Income Child Benefit Charge, it may be a great idea to call me on 01908 774320 and let's see how I can help you.
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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.
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