The High Income Child Benefit Charge (HICBC) was introduced in 2013 to charge tax on individuals claiming child benefit who were earning an annual income in excess of £50,000.
The tax charge equates to the following:
- One per cent of the total Child Benefit received for every £100 earned over £50,000 per annum
- 100 per cent of the total Child Benefit received for individuals earning over £60,000 per annum.
A decade has now passed since the introduction of the HICBC, and these thresholds have never changed, meaning more people are caught by this tax charge.
Individuals who fall into this category can decide to opt out of receiving child benefit and, therefore, avoid paying the charge.
Unsurprisingly, as the number of workers reaching the threshold has increased, so have the numbers opting out.
In the year to 31 August 2022, 683,000 families had opted out of receiving child benefit – a figure that has increased by five per cent from 651,000 in the year before.
Points of tension
A recent debate in parliament highlighted the issue of HICBC and how it was impacting families.
Victoria Atkins, financial secretary to the Treasury, stated that the Government was aware of certain ‘points of tension,’ but argued that: “increasing the threshold to more than £50,000 could impact the Government’s spending on public services.”
Should I opt out?
While it seems logical to avoid the HICBC, especially when earning over £60,000 a year, this may result in the claimant missing out on National Insurance (NI) credits.
NI credits are used to make sure that an individual qualifies for certain benefits, including state pension. Opting out may also result in the claimant’s child not automatically receiving a National Insurance number. These factors should be considered before deciding whether to opt out.
For more information and advice about this charge and its obligations on higher earners, contact us today.