If you have recently been contacted by HM Revenue & Customs (HMRC), it may be regarding the High Income Child Benefit Charge (HICBC).
This notice could be urging you to reassess whether you owe this charge, especially if you or your partner earned over £50,000 last year.
Understanding the HICBC
The HICBC is a tax charge that applies to higher-income individuals who receive child benefit.
The charge is calculated based on your adjusted net income, which includes your salary along with any taxable benefits like a company car or private medical insurance.
For the 2022/23 tax year, if your adjusted net income surpassed £50,000, you might be liable for this charge.
For those whose income falls between £50,000 and £60,000, the charge applies partially, meaning you would need to repay a portion of the child benefit received.
However, if your income exceeded £60,000, the entirety of the benefit would need to be repaid.
Who is liable for the HICBC?
The responsibility for paying the HICBC lies with the person in a household with the higher adjusted net income if both you and your partner earn above the threshold.
Historically, from the 2012/13 tax year through to 2023/24, the threshold stood at £50,000.
However, starting with the 2024/25 tax year, the threshold has increased to £60,000, with a new upper limit set at £80,000.
Should you opt out of child benefit payments?
There is an option to opt out of receiving child benefit payments, which can be worth considering if you are likely to face the HICBC.
However, this option isn’t available if you are using the payments to offset overpayments or to settle benefits received from another country.
Opting out does not exempt you from any HICBC owed for the tax years when you were receiving child benefit.
Obligations after opting out
If you choose to stop receiving child benefit, your obligations do not end there.
You must still pay any HICBC owed for the period during which you received the benefit.
Even after opting out, you must keep HMRC informed of any changes in your family circumstances that might affect your child benefit entitlement.
This could include the birth of a new child, a change in your relationship status, or other changes that might influence your entitlement.
Reviewing your tax return
HMRC is advising all taxpayers to review their tax returns for the 2022/23 tax year to ensure that the HICBC has been properly calculated and paid.
If you received child benefit and had an income above the threshold, double-check that the charge was correctly applied.
You will need information such as the start date of your child benefit claim and, if relevant, when it ended.
If you discover any errors, whether you have underpaid or overpaid, you should amend your tax return as promptly as possible.
You have until 30 September 2024 to correct any mistakes without facing penalties, but the final statutory deadline to amend your 2022/23 return is 31 January 2025.
For those uncertain about their HICBC obligations or who need professional advice, please speak to our team.
