Introduced in 2013, the High Income Child Benefit Charge (HICBC) charges tax on individuals claiming child benefits who earn over £50,000 annually.
The tax charges equate to the following:
- 1%of the total Child Benefits received for every £100 earned over £50,000
- 100% of the total Child Benefit received for individuals earning over £60,000 annually
A decade has passed since the introduction of the HICBC, and these thresholds have never changed.
More people are passing beyond the existing threshold and into the charges territory. Individuals falling into this category can opt out of receiving child benefits and avoid paying the charge. Unsurprisingly, as the number of workers reaching the threshold has increased, so has the numbers opting out.
As of the August 2022 year-end, 683,000 families had opted out of receiving child benefits due to the HICBC – a figure that jumped five per cent from 651,000 in 2021.
Points of tension
As highlighted in a recent debate, HICBC impacts families, and the Government is aware of particular ‘points of tension’.
However, Victoria Atkins, financial secretary to the Treasury, argued that: “increasing the threshold to more than £50,000 could impact the Government’s spending on public services.”
Should I opt out of the High Income Child Benefit Charge?
While it may appear logical to avoid the High Income Child Benefit Charge if you earn over £60,000 a year, you will encounter certain pitfalls if you do so, namely missing out on National Insurance (NI) credits.
NI credits are necessary to qualify for certain benefits, including your state pension and the claimant’s child not automatically receiving a National Insurance number.
