The Low Incomes Tax Reform Group (LITRG) has urged the government to raise the High Income Child Benefit Charge (HICBC) threshold to avoid it affecting basic-rate taxpayers for the first time in April 2021. The £50,000 threshold for the HICBC has remained static since 2010.
The LITRG stated that this goes against the original policy intent, and is “likely to cause the government additional difficulties in raising awareness about the charge among those who do not consider themselves on a high income”.
Tom Henderson, Technical Officer at the LITRG, said:
‘When the HICBC was announced in 2010, the government’s policy intent was that it would only affect higher-rate taxpayers from January 2013. For the 2012/13 tax year, the higher-rate threshold – the point at which an individual is liable to the higher rate of tax – was £42,475. Since then, the higher-rate threshold has risen broadly in line with inflation but the £50,000 threshold for the HICBC has remained static.
‘The government has so far resisted calls to up-rate the £50,000 threshold, but this is no longer tenable now the higher-rate threshold will overtake it from 6 April 2021.’
In its Budget submission, the LITRG calls for the point at which child benefit is fully clawed back to increase from £60,000 to £75,000.
Who pays the charge?
You may have to pay the tax charge if you have an individual income of over £50,000 and either you or your partner get Child Benefit. Whoever has the higher income is responsible for paying the charge.
For every £100 of income exceeding £50,000, the charge is calculated as 1% of the child benefit received. This means that if you have an income of £60,000 or more, 100% of the child benefit is repayable via the tax charge. If you are liable for the tax charge you must register for Self Assessment and complete a tax return each tax year.
The Chancellor will present the 2021 Budget on Wednesday 3 March. Our tax specialists will be watching the Budget and will provide commentary on any changes to the High Income Child Benefit Charge. To pick up on our commentary, follow us on Twitter (@Hawsons) or LinkedIn.
More from our tax experts
You can find all of our latest tax articles and tax resources here.
If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.
Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.
Free initial consultation
Tax Director, Sheffield
0114 266 7141
More similar content
HMRC has confirmed that the fifth Self-employment Income Support Scheme (SEISS) grant covering the period May 2021 to September 2021 will open to claims from late July. To be eligible for the grant, an individual must be self-employed or a member of a partnership....
A report published by the Office of Tax Simplification (OTS) has recommended extending the deadline by which divorcing couples are able to claim spousal exemption on Capital Gains Tax when dividing their assets. Married couples or civil partners can transfer assets...
The Office of Tax Simplification (OTS) has recommended that the government double the Capital Gains Tax (CGT) reporting and payment deadline for disposals of UK residential property to 60 days. Rules introduced in April 2020 mean that a UK resident disposing of UK...
New tax obligations from April 2023 From 6 April 2023, significant changes will be made to the Self-Assessment reporting system for landlords with gross rental income above £10,000 per tax year. Bringing landlords within the scope of MTD is part of HMRC’s plan to...