Chancellor Jeremy Hunt has announced a significant reform to the high-income child benefit charge (HICBC), raising the threshold to £60,000 from April 2024. Following our previous blog on The 2024 Spring Budget, one significant update is the change in the income thresholds for repaying any child benefit claimed during the year.
As your local accountants in Exeter, we have outlined how these changes to the HICBC may impact you and will further discuss the implications and progression of these reforms.
The HICBC is a tax charge designed to reclaim child benefits where you or your partner has an adjusted net income (ANI) over a specific threshold. If you do not have a partner, the HICBC can apply based on your ANI.
Up until the tax year ending April 5, 2024, the rules were as follows:
From April 6, 2024, the Chancellor announced these changes:
Key point: If your ANI is under £80,000 you will no longer have the child benefit clawed back in full. So, if you have previously not been claiming child benefit due to your ANI being £60,000 or over, you may now want to reconsider claiming if your ANI is under £80k.
The HICBC is calculated using your adjusted net income(ANI). The starting point to calculate ANI is to add up all your taxable income for the tax year, this would include income such as:
From the above, you can then deduct the following:
For further details, please see the Government website for calculating your adjusted net income.
Key Point: Accurately calculating your ANI is crucial for determining your HICBC liability and preparing your tax returns. Our Chartered Accountants in Exeter can help ensure your calculations are precise and provide advice on minimising your tax liability.
Even if you have to repay the child benefit in full, there is one compelling reason to claim it: contributing to your state pension.
Claiming child benefit for a tax year counts as a contributing year towards your state pension. Keep in mind you need to build up 35 full years currently to gain a full state pension entitlement at retirement age.
So, if one of the parents is a full-time parent and not working, they won’t be contributing towards their state pension. However, they can get a qualifying year for their state pension by claiming child benefit, even if the benefit has to be repaid in full by the working partner.
Key Point: The non-earning parent must be the one who claims the child benefit. By claiming child benefits, the non-earner gets National Insurance credits.
If you’re thinking, “It’s now worth claiming child benefits from April 6, 2024,” don’t worry – you haven’t missed out. Here’s what you need to know:
To learn more about how to claim and check your eligibility, please visit here.
However, keep in mind that if the claim is processed quickly some of the child benefit may relate to the 2023/24 tax year, which must be considered when preparing your self-assessment tax return. For more information, read our blog ‘How to register for self-assessment?’
Key Point: Make sure to account for any benefits received in your self-assessment tax return. Or you can let us know the amount claimed, and our personal tax accountants at Sidaways Limited will ensure it’s accurately reflected in your tax returns.
A point worth noting is that even if the lower earner in the couple claims the child benefit, the high-income partner will always pay the HICBC.
Also please keep in mind that individuals affected by the HICBC are generally required to file a self-assessment tax return (if they don’t do so already).
Key Point: You can claim child benefits and then opt out of receiving the payments. This might be a good option if you don’t want to pay the high-income child benefit charge.
Our team at Sidaways Limited understands the complexities of the High-Income Child Benefit Charge (HICBC) and is always committed to offering our client expert insights and strategic guidance to handle the evolving financial landscape. If you need advice on how the HICBC affects you or want to learn more about the changes, please contact our experts today.
Should you require more assistance with professional accounting services, we offer a comprehensive range including cash flow management, capital gains tax, and accounts preparation.
Email: dan@sidaways.co.uk
Tel: 01392 360008
---
Dan Routcliffe
Email: dan@sidaways.co.uk
Tel: 01392 360008
More Posts by Dan
More Posts in Advice
Fill out the form below and a member of our team will get back to you.
