childcare_vouchers

ATT welcomes changes to High Income Child Benefit Charge, but further improvements are needed

6 March, 2024

Saving basic rate taxpayers from the High Income Child Benefit Charge is long-overdue, says the Association of Taxation Technicians (ATT), but further planned changes won’t solve everything.

The Chancellor announced at today’s Spring Budget that, from April 2024, taxpayers will only need to pay HICBC once their income reaches £60,0001, meaning basic rate taxpayers will no longer have to worry about the charge. 

The level of income at which taxpayers will end up repaying all the child benefit they receive will also increase this April, to £80,0002. This means many households will be able to keep more of the benefit they receive, as the rate at which the HICBC claws back child benefit will be halved3.

Jon Stride, Vice Chair of the ATT Technical Steering Group, said:

“This increase in the HICBC threshold is long-overdue. The ATT has been calling on the Government to raise the HICBC threshold4 for several years now, so we’re relieved that action is being taken to help working families. 

“When HICBC was first proposed, back in 2010, it was only meant to affect families who paid higher rate tax. But increases to tax thresholds up to 2021 meant the HICBC also started to affect basic rate taxpayers, and we’ve been stuck with that since. The threshold increases announced today mean basic rate taxpayers don’t need to worry about HICBC, which is great news as it’s a commonly misunderstood policy.”

Confusion can arise because HICBC is based on the income of the higher-earner in a household, even if they are not the one who claims the child benefit. Another common criticism is that, where one person in a couple earns £80,000 and the other earns nothing, the high earner will repay all the child benefit received via the HICBC, whereas a couple who both earn £40,000 won’t be affected by the HICBC at all. 

Jon Stride continued:

“It’s encouraging to see this unfairness has been recognised in today’s Budget, and that plans are in place to charge HICBC based on household income from April 2026. The Chancellor promised a consultation on how this will work, so we’ll have to wait and see how the Government plans to solve this long-standing flaw in the policy, which we welcome.”

Notes for editors:

  1. The current income threshold from which HICBC applies is £50,000. It has been fixed at this level since HICBC was introduced with effect from 7 January 2013.
  2. The current income level at which child benefit is fully repayable is £60,000.
  3. The HICBC applies progressively. Under current rules, 1% of the child benefit claimed by a household in a tax year must be repaid for every £100 by which the higher-earner in the household’s income exceeds the threshold (currently £50,000). For instance, if that person’s income is £50,100 then 1% of the child benefit claimed will need to be repaid via the HICBC. If their income is £55,000 (£5,000 over the current threshold) they will repay 50% of the child benefit claimed. Once income reaches £60,000 the child benefit received is clawed back in full via the HICBC.
    From 6  April 2024, the repayment threshold will be raised to £60,000 and full clawback will only occur once income reaches £80,000. The rate of clawback is therefore reduced. For instance, a household’s higher-earner with income of £65,000 (£5,000 over the threshold) will only pay back 25% of the child benefit received, rather than the current 50%. Full clawback of child benefit will only occur once income reaches £80,000.
  4. ATT Budget Representation - High Income Child Benefit Charge.