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Changes to High Income Child Benefit Tax Charge: Taking Advantage of Reduced Rates
08/04/2024

 

Introduction:

The landscape of high-income child benefit charges (HICBC) in the UK is undergoing a transformation, with significant changes being implemented to alleviate the burden on families. Understanding these changes and their implications can help households navigate the tax system more effectively while maximizing benefits.

 

How it worked previously:

Previously, the tax charge was tapered and increased gradually for those with incomes between £50,000 and £60,000. For the tax year 2023-24, this amounted to 1% of a family's child benefit for every £100 of income exceeding £50,000. Once income surpassed £60,000, the tax charge equalled the total child benefit award.

 

What it's changing to:

Legislation has changed, increasing the HICBC starting threshold to £60,000. Additionally, the HICBC taper will be extended to incomes between £60,000 and £80,000. For those falling within this bracket, the rate at which HICBC is charged will be halved, equalling 1% for every £200 of income exceeding £60,000. Taxpayers with incomes above £80,000 will face the full amount of child benefit paid as the tax charge.

 

Not yet claiming?

For individuals who have not yet claimed Child Benefit, there's an opportunity to benefit from these changes. Child Benefit can be claimed through the HMRC app or online platform and It's worth noting that Child Benefit is automatically backdated for three months, or to the date of the child's birth if later.

 

New Child Benefit claims made between April 6, 2024, and July 8, 2024, will result in payments being backdated. These claims will be subject to the charge in the 2024-2025 tax year if the claimant's income exceeds the new threshold of £60,000 – rather than the previous £50,000 threshold.

 

Conclusion:

The amendments to the high-income child benefit tax charge represent a positive step towards a fairer tax system for families in the UK. By increasing the starting threshold and introducing a tapered approach, the government aims to provide relief to households while maintaining fiscal responsibility. For those who have not yet claimed Child Benefit, understanding the process and taking advantage of reduced rates can lead to significant financial benefits. As these changes take effect, it's essential for individuals to stay informed and make informed decisions regarding their tax obligations and benefits entitlements.


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