Taxpayers who fall into the high income child benefit charge will see changes to the regime from Summer 2025. Any individuals who have previously been required to complete self assessment tax returns to report the child benefit received as their charges will be deductible through PAYE earnings as HMRC open up a new online service to report their family’s child benefit payments.
What are the High Income Child Benefit Charge rules?
You may have to pay the High Income Child Benefit Charge if you or your partner have an individual income that’s over the threshold and you or your partner get Child Benefit, or someone else gets Child Benefit for a child living with you and they contribute to an equal amount of the child’s upkeep.
It doesn’t matter if the child living with you is not you own child, so the rules include step-children for example.
The threshold, from 5th April 2024 is £60,000 and was £50,000 for the tax years up to this point. If yours or your partner’s adjusted net income is above this amount and receive Child Benefit, the rules will impact your household. For couples where both individuals earn in excess of this, the higher earner will be responsible for paying the additional tax charge.
How are the charges calculated?
From 5th April 2024, the High Income Child Benefit Charge is 1% of every £200 of adjusted net income over £60,000 up to £80,000. This means that the benefit is repaid in full when earnings are in excess of £80,000 and 50% repaid if adjusted net income were at £70,000.
The Facts about High Income Child Benefit Charges
- Between 2010 – 2020, HMRC have raised £2.8 billion from HICBC
- In 2019/20 624,000 individuals decided to not claim the child benefit
- Two parents could earn £59,000 each (total £118k) and not be required to report or pay, however a househould where one parent is earning £80,000 and the other earning £0 would be required to repay all child benefit
- The previous conservative Government announces that they would consult so that HICBC would be based on household income and not individual income – Rachel Reeves first budget in Autumn 2024 announced that this would not proceed.
What’s Changing?
Over the past few years, the higher earning partner has been required to report via a self-assessment tax return, even if their tax has always been collected through PAYE and then be required to repay in a lump sum, however the Government has announced that they will be looking to collect High Income Child Benefit Charges through PAYE codes in Summer 2025. This will reduce the need for tax payers to register for self-assessment.
More details are to be released during the year; stay informed with our newsletter and updates.
How can Brisan Help?
We understand the complexities of High Income Child Benefit Charges and their impact on your family’s finances. Our proactive approach means we’ll work closely with you to optimise your income structure, ensuring you make informed decisions about your child benefit claims.
Reach out to our team to discuss your options when it comes to High Income Child Benefit Charges.
