The High Income Child Benefit Charge (HICBC) was introduced in 2013 and was set up to charge tax on individuals claiming child benefits who were earning a yearly income in excess of £50,000.
The tax charges equate to the following:
A decade has now passed since the introduction of the HICBC, and these thresholds have never changed, meaning more and more people are passing beyond the threshold and into the territory of the charges.
Individuals who fall into this category can decide to opt out of receiving child benefits and, therefore, avoid paying the charge.
Unsurprisingly, as the number of workers reaching the threshold has increased, so has the numbers opting out.
As of the year-end of August 2022, 683,000 families had opted out of receiving child benefits due to the HICBC – a figure that has jumped up five per cent from 651,000 in the year before.
Points of tension
A recent debate in parliament highlighted the issue of HICBC and how it was impacting families.
Victoria Atkins, financial secretary to the Treasury, stated that the Government was aware of certain ‘points of tension’, but argued that: “increasing the threshold to more than £50,000 could impact the Government’s spending on public services.”
Should I opt out?
While it seems logical to avoid the HICBC, especially when earning over £60,000 a year, there are certain pitfalls to expect from doing so, namely, the claimants missing out on National Insurance (NI) credits.
These are used to make sure you qualify for certain benefits, including your state pension and the claimant’s child not automatically receiving a National Insurance number. It would be wise to weigh up these factors before deciding to opt out.
For more information and advice about this charge and its obligations on higher earners, contact us today.
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