On the 6th of April 2024, the clawback threshold for the high-income child benefit charge (HICBC) was increased to £60,000.
In the spring budget earlier this year, it was announced the HICBC threshold would be increased to £60,000 from the 6th of April 2024. If you have previously elected not to receive child benefit payments to avoid the charge, it’s worth reconsidering whether you should begin claiming payments again following this change.
HICBC Clawback Threshold Increased: What Does It Mean For You?
The HICBC was introduced in January 2013 to claw back child benefit payments where an individual or their partner had an adjusted income over £50,000. Regardless of who in a couple receives the benefit payments or whose child the payments are made for, the charge will be calculated based on the adjusted income of the higher-income partner. Until the 5th of April 2024, 1% of the benefits would be withdrawn for every £100 earned by the higher income partner over £50,000 each year. For those with an income over £60,000, the child benefits would be fully withdrawn. Keep reading to find out how these rules have changed and how the changes might affect you.
What Are The New Changes?
From the 6th of April 2024, the adjusted income threshold at which child benefit payments will begin to be withdrawn increased to £60,000. Additionally, payments will now be withdrawn at a rate of 1% for every £200 earned by the higher-income partner. Therefore, child benefit payments will only be fully withdrawn once adjusted income exceeds £80,000.
How Do The Changes Affect Me?
If your adjusted income is less than £50,000, you will be unaffected by the new rules. If your income is above £50,000 a year, you may have decided in the past to opt out of child benefit payments or chose not to register for child benefit at all, and it may be worth reconsidering following these changes.
If you previously opted out, and your income is less than £80,000, it might be worth opting in again. Or if you haven’t previously registered for child benefit, you may now wish to start a claim for the first time. This is because if your income is less than £60,000, you will no longer have to pay back any child benefit you receive – or if your income is between £60,000 and £80,000, you may not have to pay it back in full.
It is important to note that if your adjusted income is more than £60,000, you must complete a tax return to report the high income child benefit charge if you decide to claim the payments.
You can find details on how to opt back in or register on the GOV.UK website.
Finally, if your adjusted income is above £80,000, in some circumstances, it may still be worthwhile to register, even if you decide to opt out of payments. For example, you may get National Insurance Credits, which could be advantageous if your partner is a non-earner. It will also ensure your child is registered to receive an NI number shortly before they turn 16.
What Is My Adjusted Income?
An adjusted net income is an individual’s total taxable income before any allowances but after a deduction for certain tax reliefs such as:
- Pension contributions paid gross (before tax relief)
- Pension contributions where your pension provider has already given you tax relief at the basic rate (you need to deduct the ‘grossed-up’ amount)
- Gift Aid donations
- Trading losses
What Should I Do Now?
The rules around child benefits can be complicated, so it’s in your best interest to get in touch with area experts like our team at Digital Tax Matters to make any financial decisions with confidence. We’ll walk you through your adjusted net income and help you make the most of these changes to the HICBC. Fill out a contact form today, and a member of our team will get in touch as soon as possible.