In the 2024 Spring Budget announcement, the Chancellor increased the high-income child benefit charge (HICBC) threshold effective from April 2024.
What is the High Income Child Benefit Charge?
The High Income Child Benefit Charge (HICBC) was initially introduced in 2013 as a result of the October 2010 spending review proposal to withdraw child benefit from higher rate taxpayers. Initially, the charge applied to households with one person earning more than £50,000 per year, which aligned with the higher rate tax threshold at the time.
Inflationary increases in personal allowance and higher rate tax thresholds has meant that basic rate taxpayers could now fall within the scope of HICBC. This led to the Chancellor increasing the threshold in the 2024 Spring Budget.
What changes were made to HICBC in the 2024 budget?
The Chancellor announced that the High Income Child Benefit Charge will increase to £60,000 from 6th April 2024.
The charge is tapered up to an income of £80,000 with 1% of the child benefit amount charged for every £200 of income that exceeds the £60,000 threshold. If income exceeds £80,000, the charge is equal to 100% of the child benefit payment.
How will the changes affect families?
The increase in threshold means that basic rate taxpayers, who can earn up to £50,270, will not be liable for HICBC.
However, despite these changes, the policy still attracts criticism around inequality as it currently focusses solely on one higher earning parent in the household.
For example: a two-parent family each earning £59,000 will not face the HICBC on their £118,000 combined income. However, a single parent earning £80,000 will loose 100% of their child benefit.
The Chancellor also announced a future consultation to address this issue with a view to switch the HICBC basis from individual income to household income from April 2026.
Details are still to be announced on this and it remains to be seen whether the result of the upcoming general election will have on High Income Benefit Charge with the Conservatives pledging to further raise the threshold to £120,000.
How can Ormerod Rutter help?
The HICBC remains a complex piece of tax legislation which many taxpayers find difficult to navigate. Fluctuations in incomes and changing family circumstances add further complications.
Our expert tax team will be able to advise you on how the changes to HICBC may affect you and help in ensuring that your payments are correct.
To get in touch, drop us a line on hello@ormerodrutter.co.uk, or give us a call on 01905 777600.
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