Child Benefit Changes – Actions to TakeWritten on May 30, 2024 by Kirk Rice LLP
In the March 2024 Spring Budget, it was announced that the government were finally listening to the pleas of hard-pressed parents by revising the High Income Child Benefit Charge (HICBC).
When first introduced by the Conservative/Liberal Democrat coalition government, this tax charge was deemed unfair in its scope and application. In essence, a single-parent household could see the Child Benefit payments clawed back where the parent was earning £50,000 or more, whilst for a household with two parents, they could each earn £49,999 (so £99,998 in total) and yet not face the tax charge at all. This was (and still is) grossly unfair.
The charge was levied against the higher earning partner in the household, which meant that for every £2 of income above the £50,000 threshold, £1 of Child Benefit was clawed back. Above £60,000, the full Child Benefit was lost.
Roll on to the 2024 Spring Budget, and the government finally recognised that the HICBC needed revision to help with the cost of living crisis. The point at which the clawback begins has risen to £60,000, with the full Child Benefit being repaid by the time the higher earner’s income has reached £80,000. The government have not, however, addressed the continuing inequality between single-parent and two-parent households.
Due to the complexity of the HICBC, many affected people opted out of claiming Child Benefit to avoid falling into self-assessment and incurring an unwelcome tax charge. But now that the threshold has been raised, it may be worthwhile to claim once again the Child Benefit where the higher earner’s income is up to £80,000, even if it means they need to file a tax return to repay some of the tax charges. Any years the claimant claims Child Benefit will count as a National Insurance credit for state pension purposes if they are not working.
A claim may only be backdated up to a maximum of 3 months, so to receive the full allowance for 2024-25 (the current tax year), the claimant should register by 5 July 2024. The new rate of Child Benefit is £25.60 per week for the eldest child and £16.95 for additional children.
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More information can be found here:
For first-time claimants: https://www.gov.uk/child-benefit
For people restarting the Child Benefit payments: High Income Child Benefit Charge: Restart your Child Benefit payments – GOV.UK (www.gov.uk)
If you have any questions about how this, please email info@kirkrice.co.uk to arrange a call with the appropriate specialist.
Please note: This article is correct as at the publication date. The answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made. The information is based on current tax legislation which may change in future. Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of relief from taxation are subject to change. The Financial Conduct Authority does not regulate tax planning.
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