The first stage of the changes to the High Income Child Benefit Charge (HICBC), announced in the Spring Budget, apply from 06 April 2024. Many families who previously chose not to claim Child Benefit rather than pay the HICBC, should now reconsider how this change affects them. HMRC estimate around 180,000 families will benefit from this.
HICBC claws back Child Benefit in full when adjusted net income of the household’s highest earner exceeds the upper threshold. Adjusted net income means total taxable income, before any personal allowances and less certain tax reliefs. A tapered withdrawal of Child Benefit applies when income of the higher earner is between the lower and upper thresholds. It is these thresholds which have been changed from 06 April 2024. The lower threshold increases from £50,000 to £60,000, and the upper threshold from £60,000 to £80,000.
Due to the threshold increases, a taxpayer who previously opted not to receive Child Benefit should now reconsider their position.
Examples:
|
|
|
ADJUSTED NET INCOME OF THE HIGHER EARNER | PERCENTAGE OF CHILD BENEFIT RETAINED 2023/24 | PERCENTAGE OF CHILD BENEFIT RETAINED 2024/25
|
£55,000
| 50% | 100% |
£60,000 | 0% | 100% |
£65,000 | 0% | 75% |
£70,000 | 0% | 50% |
£75,000 | 0% | 25% |
When to claim
You can claim Child Benefit (or opt to receive payments if you have an existing claim without payment) by using HMRC's app or online. Timing of the claim is key.
Child Benefit is automatically backdated for 3 months, or to the date of birth of the child if later. Please be aware that for HICBC purposes, backdated claims will fall into 2023/24 if the claim is made before 6 April 2024 and into 2024/25 if the claim is made on or after 6 April 2024 but before 5 April 2025.
New Child Benefit claims made on or after 6 April 2024 and before 8 July 2024 will result in payments being backdated but will be subject to the charge in the 2024/2025 tax year, where income exceeds the new threshold of £60,000. If you have claimed Child Benefit but do not currently receive payments but now wish to restart them, you should carefully consider from what date to do this. If you start to receive payments before 6 April 2024, please note you might have to pay the HICBC for 2023/2024.
There may be an additional advantage to claiming Child Benefit, depending on your individual circumstances. A parent who claims Child Benefit for a child under 12 may benefit from automatic Class 3 National Insurance Contribution credits (NICs), potentially giving entitlement to certain contributory benefits, such as qualifying years for state pension entitlement. An intention has been announced to enable parents who have not claimed Child Benefit to claim NIC credits so their state pension entitlement is not affected. This is not available yet and is likely to be a couple of years or so before it is, and could be subject to change.
From 2026
A consultation was also announced in the Spring Budget on changing the basis on which the HICBC is calculated from individual to household income by April 2026.
If you need any help with deciding whether to make a claim please do not hesitate to get in touch.
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