The High-Income Child Benefit Charge (HICBC) is a tax charge 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, and 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 each tax year.
The current scenario
The HICBC has been a source of 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 to pay the charge.
This requirement can be perplexing for people with otherwise simple, straightforward tax affairs. In particular, they may be unaware that they need to file a personal tax return because of the HICBC.
The Government, recognising the complexities of the current system, has announced plans to simplify the process for taxpayers liable for the HICBC.
The proposed changes, include deducting the HICBC directly from salaries via the PAYE system.
This move aims to eliminate the need for those affected by the HICBC to register for Self-Assessment, thereby reducing administrative burdens for both taxpayers and HMRC.
However, the specifics of how this system will work in practice, or the notification process for taxpayers, are still to be provided.
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 or your partner earns over £50,000 and either of you are receiving child benefit, the highest earner will be liable for the HICBC. They will need to register for Self-Assessment and submit a tax return.