The High Income Child Benefit Charge (HICBC) came into force January 2013 and has applied to taxpayers whose income exceeds £50,000 in a tax year and who are in receipt of child benefit. It was announced as part of the Spring Budget measures that the income threshold at which HICBC starts to be charged will be increased from £50,000 to £60,000 effective from April 2024.
The HICBC is charged at the rate of 1% of the full Child Benefit award for each £200 (2023-24: £100) of income between £60,000 and £80,000. (2023-24: between £50,000 and £60,000). For taxpayers with income above £80,000 (2023-24: £60,000) the amount of the charge will equal the amount of Child Benefit received. The HICBC therefore either reduces or removes the financial benefit of receiving child benefit. Increasing the HICBC threshold is expected to have a positive impact for approximately 485,000 families.
The Chancellor had been subject to intense lobbying regarding the unfairness of this charge as it is levied on an individual basis. For instance, currently dual income families on £49,000 each (with a household income of £98,000) may not be liable to the HICBC, but a single parent earning over £50,000 would be. Going forward, the government intends to administer the HICBC on a household rather than individual basis, but this move is expected to take until at least April 2026.
For new Child Benefit claims made after 6 April 2024, any backdated payment will be treated for HICBC purposes as if the entitlement fell in the 2024-25 tax year if backdating would otherwise create a HICBC liability in the 2023-24 tax year.
If the HICBC applies to you or your partner it is usually worthwhile to claim Child Benefit for your child, as it can help to protect certain benefits and will make sure your child receives a National Insurance number. However, you still have the choice of continuing to receive child benefit and pay the tax charge or elect to stop receiving Child Benefit and not pay the charge.