HM Revenue & Customs (HMRC) has recently announced changes to the Child Benefit rules, which will come into effect from the 2024/25 tax year onwards. These changes are aimed at simplifying the system and ensuring that the benefit is targeted towards those who need it most.
Key Changes to Child Benefit Rules
The most significant change is the increase in the income threshold at which the High Income Child Benefit Charge (HICBC) applies.
This charge is a tax on Child Benefit received by higher-earning families. From April 2024, the threshold will rise from £50,000 to £60,000. This means that more families will be exempt from the charge.
Another important change is the reduction in the taper rate. The taper rate is the percentage of Child Benefit that is withdrawn for every £1 of income earned above the threshold. The taper rate will be halved from 1% to 0.5%. This means that families with incomes slightly above the threshold will retain more of their Child Benefit.
Who Will Be Affected by the Changes?
The changes will primarily benefit higher-earning families with children. Families with incomes between £50,000 and £60,000 will no longer be subject to the HICBC. Families with incomes between £60,000 and £80,000 will pay a lower tax charge on their Child Benefit.
How to Claim Child Benefit
To claim Child Benefit, you must complete a claim form, which can be obtained from HMRC or downloaded from the government website. You will need to provide information about your child’s date of birth, National Insurance number, and your bank details.
Once your claim has been processed, you will receive Child Benefit payments every four weeks. You can also choose to have your payments paid directly into your bank account.
How to Pay the Child Benefit Charge for High Income
If you are liable to pay the HICBC, you will need to complete a self-assessment tax return. The charge will be calculated and collected through your tax return.
Additional Information
For more information on the changes to Child Benefit, you can visit the government website or contact HMRC directly. You can also find helpful information on the Citizens Advice website.
Key Changes and Their Implications
Stay Informed: Keep up-to-date with the latest changes to Child Benefit rules and regulations.
Accurate Record-Keeping: Maintain accurate records of your income and expenses to ensure correct HICBC calculations.
Timely Tax Returns: File your self-assessment tax returns on time to avoid penalties.
Utilize HMRC Resources: Use HMRC’s online tools and resources to understand your obligations and calculate your HICBC liability.
Increased Income Threshold for High Income Child Benefit Charge (HICBC):
Previous Threshold: £50,000
New Threshold (from April 2024): £60,000
Impact: A wider range of families will now be exempt from the HICBC, reducing the tax burden on many higher-earning households.
Reduced Taper Rate:
Previous Taper Rate: 1%
New Taper Rate (from April 2024): 0.5%
Impact: This reduction means that for every £1 of income earned above the threshold, a smaller portion of Child Benefit will be withdrawn. This provides relief for families with incomes slightly above the threshold.
Frequently Asked Questions
What is the High Income Child Benefit Charge?
The High Income Child Benefit Charge is a tax on Child Benefit received by higher-earning families.
How is the HICBC calculated?
The HICBC is calculated as follows:
Your income is reduced by the threshold (£60,000 from April 2024).
The resulting figure is multiplied by the taper rate (0.5% from April 2024).
This amount is then deducted from your total Child Benefit.
When do I need to pay the HICBC?
The HICBC is usually paid through your self-assessment tax return. You will need to complete a tax return for the tax year in which you received Child Benefit.
What if I am self-employed?
If you are self-employed, you will need to include your self-employment income in your tax return. This will be used to calculate your HICBC liability.
What if I have more than one child?
If you have more than one child, the HICBC will be calculated separately for each child.
What if I move in with a partner who is also receiving Child Benefit?
If you move in with a partner who is also receiving Child Benefit, you will need to consider your combined income when calculating your HICBC liability.
What if I separate from my partner?
If you separate from your partner, you will need to inform HMRC of the change in your circumstances. This may affect your HICBC liability.
What if I go over the income threshold during the tax year?
If your income exceeds the threshold during the tax year, you will need to pay the HICBC for that period.
What if I am unsure about my HICBC liability?
If you are unsure about your HICBC liability, you can contact HMRC for advice. You can also use the online HICBC calculator to get an estimate of your liability.
Can I claim Child Benefit for a child who lives with me but is not my biological child?
In certain circumstances, you may be able to claim Child Benefit for a child who lives with you but is not your biological child. This is usually the case if you’re a legal guardian or have parental responsibility for the child.
What happens if I receive Child Benefit by mistake?
If you receive HM Revenue & Customs (HMRC) Benefit by mistake, you should inform HMRC as soon as possible.
Can I claim Child Benefit for a child who lives abroad?
In some cases, you may be able to claim HM Revenue & Customs (HMRC) Benefit for a child who lives abroad.
Conclusion
The recent changes to the UK’s HM Revenue & Customs (HMRC) Benefit system mark a significant development for many families. By increasing the income threshold for the High Income Child Benefit Charge and reducing the taper rate, the government aims to provide greater financial support to families, particularly those with higher incomes.
To read more, click here.
