Understanding the High Income Child Benefit Charge in 2024

The UK Government has continued its policy of withdrawing child benefit from high-income households. Rather than cancelling the payment outright, HMRC imposes a High Income Child Benefit Charge (HICBC) to recoup some or all of the benefit from higher earners. Here’s what you need to know about how this charge works and how it may affect you.

Who is Affected by the High Income Child Benefit Charge?

You will be subject to the High Income Child Benefit Charge if:

  • You or your partner have an individual income of over £50,000 a year.
  • You receive Child Benefit or get financial help from someone who claims Child Benefit for a child that lives with you.

Key Points to Consider:

  • Definition of ‘Partner’: HMRC defines a partner as any person you are married to, any person you are in a civil partnership with, or any person you are living with as if you are married to or in a civil partnership with.
  • Non-Parent Guardians: It does not matter if the child living with you is not your biological or legally adopted child; you will still be subject to the charge if you claim Child Benefit.

If you are unsure whether you are affected, HMRC provides an online tool to help you determine your liability.

How Much Will You Be Taxed?

The amount of tax you need to pay depends on two factors: the amount of Child Benefit you receive and your income level.

Income Levels and Charges:

  • Income over £60,000: You will have to pay back all of the Child Benefit you receive.
  • Income between £50,000 and £60,000: You will have to pay back 1% of the Child Benefit for every £100 you earn above £50,000.

Example Calculation:

  • If you earn £57,000, you will need to repay 70% of the Child Benefit received.
    • Calculation: (£57,000 – £50,000) / 100 = 70%.

What Do You Need to Do?

If the changes affect you, you have two main options:

  1. Continue Receiving Child Benefit:
    • If you decide to keep receiving Child Benefit, you must register for Self Assessment and file a tax return every year to account for the HICBC.
  2. Stop Receiving Child Benefit:
    • To avoid the tax charge, you can opt to stop receiving Child Benefit. You will need to notify the Child Benefit Office of your decision.

Detailed Steps to Take

Registering for Self Assessment

If you choose to continue receiving Child Benefit, follow these steps:

  • Register for Self Assessment: Visit the HMRC website to register if you haven’t done so already.
  • File a Tax Return: Complete and submit your Self Assessment tax return annually, declaring your income and Child Benefit received.
  • Pay the Charge: Calculate the HICBC and include it in your tax return. HMRC will provide a bill for the amount due.

Stopping Child Benefit

To stop receiving Child Benefit:

  • Contact the Child Benefit Office: Notify them that you wish to stop receiving payments. This can be done online or by phone.
  • Confirmation: Ensure you receive confirmation that the payments have stopped to avoid unexpected charges.

Implications for Business Owners

For business owners, the HICBC can have additional considerations:

  • Income Fluctuations: If your income varies significantly from year to year, careful planning is required to avoid unexpected tax liabilities.
  • Salary and Dividends: If you draw a salary and dividends from your business, you need to consider how these impact your overall income and the HICBC.

Seeking Professional Advice

While we at TaxAgility cannot provide direct financial advice, we can discuss the implications of these changes within the broader scope of your financial planning. We can also introduce you to suitable financial advisers for specific financial advice if needed.

How We Can Help:

  • Understanding HICBC: Explaining how the charge works and what it means for your finances.
  • Self Assessment Assistance: Helping you register and complete your Self Assessment tax return.
  • Strategic Planning: Discussing strategies to manage your income and Child Benefit efficiently.

Contact Us

If you need more information or assistance regarding the High Income Child Benefit Charge, please call us on 020 8108 0090. Our team is here to help you navigate these changes and ensure your financial planning is up to date.

Important Note

We are not authorized financial advisers but will introduce you to suitable firms or individuals when you are considering transactions that would benefit from authorized advice. We are not regulated by the Financial Services Act and will refer you to an FSA-regulated provider if that will benefit you.