A low-key, yet significant, announcement within the Budget was the decision not to proceed with the reform of the High Income Child Benefit Charge (HICBC).
The previous Conservative government intended to reform HICBC, making the upper ceiling for eligibility dependent on joint household income, as opposed to one partner earning above the threshold.
The ruling that the current government would not be progressing with the proposed reforms was primarily based on the cost of implementing such a measure – an estimated £1.4 billion by 2029-30 if the threshold was set at £120,000 – £160,000.
How the High Income Child Benefit Charge works
The HICBC is a measure to ensure Child Benefit payments are reclaimed where the highest earner has an income over a prescribed threshold. It is currently applicable if either partner has an individual income that is over £60,000
If both partners’ net adjusted income (total taxable income before any allowances, such as interest from savings or dividends) is over £60,000, whoever has the higher income is responsible for paying the tax charge – they can choose to either receive Child Benefits and pay the tax charge at the end of each tax year or opt out of receiving payments, thereby no tax charge is due.
The system has been objected to as single parents can be denied child benefits if they earn just above the threshold, while two parents earning a combined, more substantial, income can claim the full entitlement.
Changes to paying the High Income Child Benefit Charge
To make it easier for all taxpayers to get their HICBC right, the government will allow employed individuals to pay HICBC through their tax code from 2025.
The government will invest £4 million to enable HMRC to pre-populate Self Assessment tax returns with Child Benefit data to ensure the HICBC is accurately calculated and reported – this will be implemented from April 2026, for tax returns for the 2025/26 financial year onwards.
How M+A Partners can help
M+A Partners’ team of tax experts assists with effective tax planning measures and ensuring compliance with regulatory requirements. For any advice on this topic, please get in touch with your usual M+A Partners contact or email enquiries@mapartners.co.uk.
