Children Have Become Less Taxing!

From 6 April 2024, there were major changes to the High-Income Child Benefit Charge (HICBC), which effectively claws back Child Benefit via a tax charge when income of the higher earner in the household exceeds a particular threshold.

https://jsca.co.uk/uk-budget-2024-blog-4-high-income-child-benefit-charge-hicbc/

The key changes were:

• The income threshold before a clawback starts increased to £60,000 (from £50,000).
• The rate of clawback is 1% for each £200 (not £100, the previous rate) of income above £60,000.

So, 100% of the Child Benefit is now not clawed back until income reaches £80,000, a big increase on the previous £60,000 threshold.

These changes will mean that a lot of families with young children will have seen a significant increase in their spending power this year.

Example

Frank is a househusband, whose wife Cheryl has income of £65,000 and claims child benefit for each of her 4 children. Child benefit rates per week are:

2023/24: 1st child: £24; subsequent children: £15.90.

2024/25: 1st child: £25.60; subsequent children: £16.95.

Cheryl’s Child Benefit claims are:

2023/24: [(£24.00 x 52) + (3 x £15.90 x 52)] =£3,728

2024/25: [(£25.60 x 52) + (3 x £16.95 x 52)] =£3,975

HICBC

2023/24: With income of over £60,000, Cheryl will have suffered HICBC equal to the child benefit received.

2024/25: With the lower threshold now £60,000 and income of £65,000, she will suffer HICBC of 25% of £3,975, i.e. £993.75.

As a result of these new rules, Cheryl and her husband’s increase in net cash from child benefit for 2024/25 is 75% of £3,975 = £2,981.25.

Reinstating Child Benefit payments

This is therefore a reminder that some people who have previously opted out of receiving Child Benefit will now want to reinstate their claims. To do so, you need to either:

• fill in an online form via the government gateway

https://www.gov.uk/child-benefit-tax-charge/restart-child-benefit

or

• contact the Child Benefit Office.

https://www.gov.uk/government/organisations/hm-revenue-customs/contact/child-benefit

After the Child Benefit Office gets your request, it can take up to 21 days before you get your first payment. The office will write to tell you how much money you’ll get from backdated payments (if any). Payments can normally be backdated for up to three months.

Remember that, if you reinstate payments, you will potentially need to file a tax return to deal with any HICBC.

Please contact us if you have any questions about the impact of HICBC on your family’s finances.

Note that, from 6 April 2026, it is intended that HICBC will be based on household income, rather than just that of the higher income generator.