You may have recently received correspondence from HM Revenue & Customs (HMRC) asking you to check if you need to pay the High Income Child Benefit Charge and to double-check the amount if you have already paid.
If you or your partner earned more than £50,000 during the year, this charge could apply to you, requiring repayment of some or all the child benefit you received.
What is the HICBC?
The HICBC is a tax charge aimed at higher earners who receive child benefit.
It is calculated based on your adjusted net income, which includes your salary and any taxable benefits, such as a company car or medical insurance.
The charge kicks in for the 2022/23 tax year if your adjusted net income exceeded £50,000.
If your income fell between £50,000 and £60,000, you would repay a portion of the child benefit received.
If it was over £60,000, you’re required to repay the entire amount.
Who pays the HICBC?
If both you and your partner have an adjusted net income above the relevant threshold, the individual with the higher income is responsible for paying the HICBC.
For tax years 2012/13 through to 2023/24, the threshold was £50,000.
As of the 2024/25 tax year, this threshold is now £60,000, with the upper limit moving to £80,000.
Opting out of child benefit payments
While you can opt out of receiving child benefit payments, this option is not available if you are using the payments to repay an overpayment or to settle certain other benefits received from another country.
If you do decide to opt-out, you remain responsible for paying any HICBC owed for each tax year up to the date your child benefit payments stop.
Responsibilities after opting out
Even if you choose to stop receiving child benefit payments, your responsibilities don’t end there.
You must continue to pay any tax charge owed for the period during which you received payments.
Additionally, after opting out, you must keep HMRC informed of any changes in your family circumstances that could affect your entitlement to child benefit.
This includes changes such as a new child, a change in relationship status, or any other factor that might impact your eligibility.
Reviewing your tax return
HMRC is encouraging all taxpayers to review their 2022/23 tax returns to ensure that the HICBC has been correctly calculated and paid.
If you received child benefit and your income exceeded the relevant threshold, double-check that the charge was accurately applied.
You’ll need details such as the dates your child benefit claim started and, if applicable, when it stopped.
If you find that you’ve made an error in your return, whether underpaying or overpaying, you should amend your return as soon as possible.
The deadline for making corrections without incurring penalties is 30 September 2024, but the statutory deadline to amend your 2022/23 return is 31 January 2025.
If you’re uncertain about your HICBC obligations and would like expert advice, please contact us today.
