What is the High Income Child Benefit Tax Charge and does it apply to me?

The High Income Child Benefit Charge (HICBC) is a tax charge that is applied to individuals in the UK who received child benefit and have an income above a certain threshold. The charge is calculated based on the difference between the individual’s income and the threshold, as well as the amount of child benefit received.

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Why does this exist?

The government offers child benefit in the UK as a way to provide financial support to families with children. This support is intended to help families cover the costs associated with raising children, such as cost of food, clothing and childcare.

Child benefit is an important part of the social safety net in the UK, as it helps to ensure that families with children are able to meet their basic needs and provide a decent standard of living for their children. In addition to help families to meet the costs of raising children, child benefits also play a role in reducing child poverty and promoting child welfare. We recently wrote an interesting article looking into what is the impact the UK’s rising childcare costs have on women’s careers and the country’s economy, which you can read below.

Child benefit is funded by the government and paid out to families on a regular basis, typically every four weeks. In order to receive child benefits, families must meet certain eligibility criteria, such as having a child under the age of 16 (or under 20 if the child is in full-time education) and being responsible for the care of the child.

What is the High Income Child Benefit Charge?

The High Income Child Benefit Charge came into effect in January 2013 and is a charge on anyone who receives child benefit and earns above £50,000. The charge is equal to 1% of the family’s Child Benefit for every £100 of income above £50,000, which means that if either you or your partner earn above £60,000, the charge will equal the total amount of Child Benefit received, meaning all monies will need to be paid back. 

Stopping Child Benefit Charge

If you or your partner know they are going to earn above £60,000, you can make a claim to stop receiving Child Benefit. If you decide to do this, ensure you’ve considered the National Insurance implications of doing so if you do. Usually, you’ll build up your National Insurance contributions when you’re working but if you’re claiming Child Benefit, you will be credited with National Insurance contributions until your youngest child is 12 (or under 16 before 2010), even if you are not working. 

Building up National Insurance contribution protects the partners’ eligibility for the full state pension. This may mean that in some circumstances it’s beneficial to claim Child Benefit and pay the amount back at the end of each tax year.

In conclusion, the High Income Child Benefit Charge is a tax that is applicable to individuals in the UK who receive Child Benefit and have an income above a certain threshold. It is calculated based on the difference between the individual’s income and the threshold. Although it may seem beneficial to stop receiving Child Benefit if collectively your household earns above £60,000, the aspect of maintaining National Insurance eligibility may need to be considered.

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Ben’s been here pretty much since the get-go and, as such, has been instrumental in growing the business into what it is today.
He’s passionate about, in his words, ‘helping people and businesses that are just constantly being taken advantage of’ by providing affordable advice and support with an eye to ‘levelling the playing field’.
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Ben doesn’t think much of government agencies and he doesn’t suffer fools; two points that aren’t always mutually exclusive.