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0113 246 1234

Child Benefit – Should you opt out?

The High Income Child Benefit Charge (HICBC) was established in 2013 to impose a tax on individuals earning over £50,000 per annum while claiming child benefits.

The tax charges are as follows:

Since the HICBC’s inception a decade ago, the thresholds have remained unchanged, leading to a growing number of people surpassing the threshold and facing the charges.

Those who fall within this bracket can choose to opt out of receiving child benefits, thereby avoiding the charge.

As the number of workers reaching the threshold has grown, so too has the number of opt-outs. By the end of August 2022, 683,000 families had opted out of receiving child benefits due to the HICBC, a five per cent increase from the previous year’s 651,000.

While opting out may appear sensible, particularly for those earning over £60,000 per year, there are potential drawbacks.

Claimants who opt out may miss out on National Insurance (NI) credits, which are necessary to qualify for certain benefits, including the state pension.

Additionally, the claimant’s child may not automatically receive a National Insurance number. It is crucial to consider these factors before deciding to opt out.

For further information and advice about the HICBC and its implications for higher earners, get in touch with us today.

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