Think you know about the Higher Income Child Benefit Charge?

Think you know about the Higher Income Child Benefit Charge?

So, most of us know that The Higher Income Child Benefit Charge (HICBC) was introduced in January 2013. Individuals with income over £50,000 per annum are liable to pay an income tax charge on Child Benefit payments they or their partner receive.

So that’s the nuts and bolts out of the way! Or is it? Avanti explains….

Let’s take a family of 4, two parents, two children under 6. Dad works 40 hours a week earning £55,000 per annum. Mum stays at home looking after the kids and hasn’t been in employment since maternity leave with child one. As mum was pregnant around the time of the changes, as a couple they decided they didn’t want the stress of tax returns each year and liability’s, so have never claimed child benefit.

What are the knock-on effects of this decision?

  • Mum has missed out on 6 years of national insurance credits which count towards the state pension.
  • Qualifying for other benefits could be reduced or eliminated altogether such as Guardians Allowance
  • Based on the above information they would actually be missing out on £894.00 of additional income from child benefit after taxes paid.
  • And finally, Juvenile registration, that is, the process whereby children are automatically allocated a National Insurance number shortly before their 16th Birthday.

But if you’re not convinced that you may need to revisit this situation for yourself as you do not believe the benefit outweighs  the hassle!

Then at least consider this, you can claim Child benefit with any income amount, but can opt not to receive payments.

What this means is;

  • Mums National insurance receives it credit contribution, relieving the issue of gaps in payment history
  • If there are no gaps in the National insurance history, qualifying for benefits (if all other criteria is met) can be met.
  • Juvenile registration is completed automatically. No messy, confusing forms to fill out
  • And finally, no tax return and no tax liability!

If you need any help calculating the tax liability on child benefit or you need a tax return completing please contact Avanti.