Parents, are you aware of the imminent changes to the HICBC from April 2024? In their efforts to make the tax system fairer, the government has announced an increase to the threshold at which parents must begin paying the HICBC from £50,000 to £60,000.
Alongside this, the current 1% rate of HICBC will be halved (0.5%), meaning that parents will be required to pay child benefit back at a slower rate.
If you don’t claim child benefit because the current HICBC threshold makes it ineffective for your family, then you may want to reconsider claiming it from April. A claim to child benefit can only be backdated for up to three months.
A quick reminder…The HICBC is a tax charge applied to anyone who claims child benefit and earns over the threshold, requiring parents to pay back some or all of the benefit they have received.
Under the new threshold and rates, the charge will increase gradually between £60,000 and £80,000, equal to 0.5% of a family’s child benefit for every £100 of adjusted net income over £60,000 each year. For parents earning income over £80,000, the charge will be equal to the total amount of child benefit they receive.
Adjusted net income refers to an individual’s total taxable income once certain tax reliefs have been deducted (e.g., Gift Aid charity donations, pension contributions and trading losses if self-employed).
Why is it changing?
The increased threshold comes as part of Jeremy Hunt’s 2024 Spring Budget announcement, where he explained the injustice of the HICBC regime. Currently, the system is such that a two-parent household earning £49,000 each is entitled to the full child benefit, whereas a single-parent earning over £50,000 would be obligated to pay some or all of it back.
Jeremy Hunt outlined the government’s commitment to establishing a household-based HICBC regime by April 2026, following consultation. Next week’s threshold and rate changes aim to provide enhanced support for families in the meantime.
How can we support?
If you are subject to the HICBC, then this must be paid back via the submission of a Self Assessment tax return each year, regardless of whether you’re employed and pay income tax through PAYE.
Whether you’re used to paying your full tax bill through Self Assessment or you’re new to paying the HICBC in this way, we can help you to navigate the intricacies of submitting your tax return in a timely and compliant manner.
Please don’t hesitate to get in touch for further assistance.