High Income Child Benefit Charge: What Are The Changes?

Contributors

  • Fraser Mackay
Tracy Dickson, Private Client Assistant Manager

Contact Tracy Dickson

or reach out to a member of our Private Client, Trusts & Estates team.

Touted as a victory for thousands of UK families, the rules on the High Income Child Benefit Charge (HICBC) have been updated. This blog outlines the changes below and explains how this may affect you. 

what were the High-Income Child Benefit Charge rules?

The rules regarding the HICBC had previously been described as “grossly unfairwith the old system flawed. Before the changes announced in the 2024 Spring Budget, claimants of Child Benefit would be required to pay back any benefit received where the following conditions were met

  • An individual or an individual’s partner receives Child Benefit, or someone else receives Child Benefit for a child that lives with you; and 
  • The individual and/or their partners adjusted net income exceeds £50,000 – adjusted net income is calculated as an individual’s total taxable income less any Gift Aid charity donations, personal pension contributions and any self-employed trading losses. 

Where the above conditions were met, Child Benefit was clawed back at a rate of 1% for every £100 of adjusted net income more than £50,000. This meant that a claimant who had an adjusted net income of £60,000 or over would have to repay all of their Child Benefit. This system therefore meant that families who earned a combined income of £98,000 (£49,000 each), were entitled to receive the full Child Benefit. Conversely, single-parent families, or families with only one earner who received £60,000 would not receive any Child Benefit as this would be clawed back in full. 

What are the new HIGH-INCOME Child Benefit Charge RULES?

The perceived unfairness of these rules has been addressed, with the threshold before any Child Benefit being clawed back being increased from £50,000 to £60,000. In addition, the limit before the Child Benefit is withdrawn in full has increased from £60,000 to £80,000. Under these new rules, which took effect from 6 April 2024, an individual will now be required to pay back 1% of the Child Benefit that they are entitled to, for every £200 of income above the £60,000 threshold. It is estimated that the changes will result in over 150,000 families maintaining the benefit in full. 

Who Pays the High-Income Child Benefit Charge and How DO THEY Pay

In the instance where an individual, and their partner, are both in receipt of adjusted net income of more than £60,000, then the tax charge is levied on the individual who is the highest earner. For these purposes, there is no requirement for an individual and their partner to be married, rather there must not be a permanent separation. 

Individuals who are liable to the High-Income Child Benefit Charge, can either opt out of receiving the benefit payments, or they can pay any tax charge at the end of the tax year by completing a self-assessment tax return. Individuals who wish to continue receiving the child benefit payments have until 31 January 2026 to report and pay the High-Income Child Benefit Charge in respect of the 2024/25 tax year. 

Comments on the Change in Rules

Despite the changing of the rules, it is still down to the individual to determine whether the High-Income Child Benefit Charge applies to themselves. In particular, individuals must remain aware that they may be caught by the HICBC rules in respect of benefits claimed on their partner’s children from a previous relationship. 

Following the changes to the rules, families who have previously opted out of receiving Child Benefit, as their adjusted net income was more than £60,000, should now consider whether they should claim Child Benefit going forward. Provided that their adjusted net income is below £80,000, they will no longer be liable to a High-income child benefit charge. 

Finally, there may still be further changes to come with the Chancellor, Jeremy Hunt, suggesting that they will look to review the HICBC rules so that this will be calculated on household income, as opposed to individual income from April 2026. However, with a General Election just around the corner, it will be interesting to see if a potential Labour government will look to revolutionise the HICBC rules sooner. 

If you have any queries about the High-Income Child Benefit Charge changes, please do not hesitate to get in contact with Tracy Dickson, Fraser Mackay or your usual AAB contact. 

How AAB can help

Private Clients & High Net Worth Individuals

Our team support a diverse array of individuals such as employed professionals, business owners, families and international sports stars. As AAB clients, they all benefit from absolute confidentiality and share a unified goal of optimising and safeguarding their personal wealth. Our services extend far beyond mere tax return completion. In addition to standard personal tax compliance, our dedicated team of personal tax specialists delivers dependable and practical tax advice, ensuring full compliance and optimal positioning.

View our private client services

Contributors

  • Fraser Mackay

Related services

Sign up for the latest industry insights

  1. Blog7th Aug 2023

    Image of couple getting the keys for their property they paid inheritance tax on

    Inheritance Tax – Could your estate be exposed?

    Many more ordinary people are becoming liable to Inheritance Tax (IHT) who may not have before. In this blog we’ll be looking at what IHT is, why the rise is occurring and how we can help you mitigate your IHT…

    By Tracy Dickson

    View more