Hundreds of thousands of parents in the UK have been blindsided by a bill from the taxman after finding out that they are no longer eligible for the full child benefit payment they receive each month. (1)
Child benefit is paid every 4 weeks to one account only, at a rate of £24.00 (for the eldest or only child) or £15.90 (for additional children) each week. It continues until your child reaches the age of 16 or age 20 if they remain in approved education or training.
This used to be a universal payment to all families with children, however, it became a means-tested payment in January 2013 when the ‘High Income Child Benefit Charge’ (HICBC) was introduced. The charge applies to anyone with an income of £50,000 or more and increases gradually for taxpayers with incomes between £50,000 – £60,000. Whilst it was widely publicised in 2013, there has been little communication since.
Here are the traps which have caught people out:
- Many taxpayers may have been aware of it when their child was first born but over time as their income has gradually risen above £50,000 (whilst the threshold has frozen), they have since forgotten.
- HICBC is not necessarily clawed back from the claimant of the child benefit. If you are in a couple, it is the higher earner who is assessed, regardless of whether the higher earner is a parent of the relevant child or has received any child benefit income.
- You do not have to be married or in a civil partnership to fall within the scope of the HICBC; living together as if married or in a civil partnership also falls within the remit. The taxpayer who is ‘caught’ may have no idea that their spouse, partner, or cohabitee is in receipt of child benefit.
- Some are unaware that it is their responsibility to let the Child Benefit Office know if one parent has exceeded this threshold.
- For those who were aware of the sliding scale threshold and as such, decided against registering for Child Benefit, they have run the risk of losing valuable National Insurance credits if the other parent was not working or earning enough to pay National Insurance contributions.
(1) Data released under a Freedom of Information request in May revealed hundreds of thousands of people have not complied with the HICBC.
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This blog is intended as an informative piece and should not be construed as advice.
If you have any further questions, please don’t hesitate to contact us. If you’re a client you can reach us on 0161 486 2250 or by getting in touch with your usual Equilibrium contact. For all new enquiries please call 0161 383 3335.
