The High-Income Child Benefit Charge (HICBC) is a tax that affects households where at least one person with parental responsibility has a taxable income exceeding £50,000.
This charge applies regardless of who in the household receives the child benefit, but it is payable by the household’s highest earner.
The highest earner may have to pay back some or all of the child benefit received during each tax year, depending on their income.
If the highest earner’s income is between £50,000-£60,000 then they will pay a portion of the benefit back, whilst the total amount of child benefit will be clawed back where income exceeds £60,000.
HICBC: The current scenario
The HICBC has been a source of some confusion for taxpayers since its introduction in 2013.
Under the current rules, the highest earner in a household affected by the HICBC must register for Self-Assessment, and submit tax returns every year, in order to pay the charge.
This is true except in instances where you choose to fill in the claim form, for example to protect your entitlement to state pension, but you opt out of receiving the payments.
The requirement to complete a Self-Assessment Tax Return can be perplexing for people with otherwise simple, straightforward tax affairs which are normally dealt with via PAYE, and many people are totally unaware of the need to file a personal tax return because of the HICBC.
Proposed changes to the High-Income Child Benefit Charge
The Government, recognising the complexities of the current system, has announced plans to simplify the process for customers that are liable to the HICBC.
The proposed changes, as outlined in recent legislation day documentation, include deducting the HICBC directly from salaries via the PAYE system.
This move aims to eliminate the requirement for those affected to register for Self-Assessment, thereby reducing the administrative burden for taxpayers and HM Revenue & Customs (HMRC).
However, the specifics of how this new method of collecting the charge would work in practice, or how taxpayers would be expected to notify HMRC, are yet to be disclosed.
Advice for handling the HICBC
While further details on the proposed changes are still to come to light, it is crucial for taxpayers to understand their obligations under the current system.
If you, your partner, or anyone else in your household, earns over £50,000 and you are receiving child benefit, the highest earner will be liable for the HICBC.
You must, therefore, continue to register for Self-Assessment and submit a tax return each year to pay the charge, if you intend to receive the payments.
If you are unsure about your tax obligations, or your responsibilities in respect of the High-Income Child Benefit Charge, please contact our team of experts for advice.