HIGH INCOME CHILD BENEFIT CHARGE (HICBC) EXPLAINED

High income child benefit charge (HICBC) laid down tax implication to households who receive Child Benefit where the adjusted net income of a taxpayer goes over £50,000 and either:

  • person or his/her partner get child benefit
  • someone else gets Child Benefit for a child living with you and they contribute at least an equal amount towards the child’s keep up.

Introduced in January 2013, it requires anyone who pays the charge need to pay an amount equivalent to some or all the child benefit that they or their partner receives. The charge is equal to one percent of a family’s Child Benefit for every extra £100 of income exceeding £50,000 each year. In case if an individual adjusted net income is over £60,000, the charge gets equal to the amount of the Child Benefit.

Adjusted net income:

Adjusted net income is the total taxable income before any personal allowances and less things like Gift Aid. One may use the HMRC Child Benefit tax calculator to get help with their adjusted net income.

Critical analysis of HICBC:

Few aspects of the HICBC have been accused as unfair on reasonable grounds:

  • The tax applies to single parents earning over £50,000 in a household, however a couple can earn up to £50,000 each which leaves the single earner/dual earner problem unaddressed.
  • This is inconsistent with other rules of HMRC and DWP which doesn’t recognize the status of cohabitants for tax allowance as the taxpayer for HICBC does not have to be the parent of the child or the legal spouse or partner of the parent to be liable for the tax charge.
  • The thresholds set at the time of its implications have not been increased, which results in bringing more families under the tax regime of Child Benefit.

Pay the tax charge:

You may either go for:

In case you elect not to receive Child Benefit, you should still need to claim it for each child as it makes sure the child or children receive a National Insurance number and also help to protect state pension contributions.

Penalty review:

HMRC issued the “Failure to Notify” penalty for the tax years 2013-14, 2014-15 and 2015-16 to customers who did not register for HICBC. However due to ongoing feedback regarding customers having a reasonable excuse for not meeting their tax obligation, HMRC announced a review of HICBC “failure to notify penalties” in November 2018. Penalties got cancelled and refunded where families made their claim for Child Benefit before HICBC was introduced, and where an individual income crossed £50,000 in or after 2013-14 tax year.

How to claim:

As only one person can get Child Benefit for a child, hence you need to decide who should claim. You can claim Child Benefit as soon as you’ve registered the birth of your child or they come to live with you. It may take up to 12 weeks to process a new Child Benefit claim (longer if you’re new to the UK) and maybe backdated for up to 3 months. While making a claim for the first time, you need to fill the Child Benefit claim form CH2 and send it to the Child Benefit Office.