In the Spring 2024 budget the Chancellor has announced that approximately 500,000 households will be on average £1,260 better off by April 2025 due to an increase in the high income child benefit charge (HICBC).
The threshold for the high income child benefit charge will be raised to £60,000 starting from April 6, 2024.
It’s expected to take 170,000 families out of having to pay the HICBC for the 2024/2025 tax year.
The HICBC is gradually reduced, so if you or your partner earn between £60,000 and £80,000, it may still be financially beneficial for you to make a claim.
For example, you will incur a 1% charge on your child benefit for every £200 of income that exceeds £60,000.
If your income surpasses £80,000, the charge will be equivalent to the full amount of the child benefit payment and you won’t receive any financial benefit from claiming it.
Martin Lewis of Money Saving Expert has got to be congratulated for campaigning on behalf of working families to have the high income child benefit charge increased.
“WE GOT THE WIN ON CHILD BENEFIT!” Mr Lewis posted on X.
He added: “Chancellor tipped me off before Budget, said this was due in large to MSE/my shows campaigning all based on all those of your who messaged me to say it was the key thing to put to him.”
“From this April threshold which hasn’t moved since 2013 rises from a single parent earning £50,000 to £60,000 and you lose child benefit totally at £80,000 (not £60,000).”
The change could have broader benefits for the economy according to the OBR with the modifications made to the HICBC potentially resulting in a rise in the number of hours worked that is comparable to approximately 10,000 additional individuals joining the workforce on a full time basis.
Do I still need to complete a tax return to pay the high income child benefit charge?
Yes, HMRC expects you to complete a self assessment tax return to pay the HICBC. You can potentially select for the HICBC to be put into your tax code which means you will pay it back via PAYE as a deduction from your salary when you are paid.
This option is alternative to paying the full HICBC in full by the 31 January self assessment payment deadline.
I have opted out of child benefit can I claim again?
The increase to the HICBC could mean individuals and partnerships who have previously opted out because they earned over the child benefit threshold might want to start claiming again.
You can restart your child benefit payments online via .GOV and for child benefit general enquiries you can call HMRC on 0300 200 3100.
The child benefit tax calculator can be used to get a rough approximation of how much child benefit you could be owed and determine if you might be subject to the high income child benefit tax charge.
Child benefit changes in the future
The freezing of income tax thresholds and the adjustment of wages in line with inflation has resulted in an increase in the gradual number of parents falling within the scope of the HICBC and this this is the main reason for the growing demand for reform.
However Mr Hunt expressed his intention to seek more input on transitioning the HICBC to a system based on households by April 2026.
This further review to child benefit aims to bring to an end the current inequality where both parents earning £49,000 annually receive the complete child benefit, while a household with a sole earner making over £50,000 does not receive it.
