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.
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