HMRC warning – Do you have outstanding High Income Child Benefit Charge payments?
If you have recently received a letter from HM Revenue & Customs (HMRC), it likely concerns the High Income Child Benefit Charge (HICBC).
This letter is a prompt to scrutinise whether you owe this charge, particularly if your income, or that of your partner, exceeded £50,000 in the past year.
What is the High Income Child Benefit Charge?
The HICBC is a tax on those with higher incomes who still receive child benefit.
The charge is tied to your adjusted net income, which encompasses your salary as well as taxable perks like a company car or private health insurance.
If your income surpassed £50,000 during the 2022/23 tax year, you may find yourself owing a portion or even the entirety of the child benefit you received.
For those whose income falls between £50,000 and £60,000, the charge will take a bite, albeit a smaller one.
Cross the £60,000 threshold, however, and you’ll be required to repay the full amount.
Who bears the burden?
Responsibility for paying the HICBC falls on the individual in the household with the higher adjusted net income, assuming both partners cross the income threshold.
From 2012/13 through to 2023/24, this threshold was set at £50,000.
However, the 2024/25 tax year saw the threshold rise to £60,000, with an upper limit now set at £80,000.
To opt out or not?
You might consider opting out of child benefit payments altogether if you’re likely to be hit by the HICBC.
However, this isn’t a straightforward decision.
If you’re using the benefit to offset other overpayments or foreign benefits, opting out isn’t an option.
Opting out won’t clear you of any charge owed for the years when you did receive the benefit.
Your duties don’t end with opting out
Deciding to stop child benefit payments doesn’t free you from further obligations.
You’re still liable for any HICBC owed during the period when you received the benefit.
Additionally, even after opting out, you must inform HMRC of any changes in your circumstances, such as a new child or a change in your relationship status that could affect your eligibility.
Don’t forget your tax return
HMRC is urging all taxpayers to review their 2022/23 tax returns to ensure the HICBC has been correctly applied.
If you had an income above the threshold and received child benefit, you must verify that the charge was accurately calculated.
You’ll need details like the start date of your claim and, if applicable, when it ended.
If you find you’ve made an error – whether you’ve underpaid or overpaid – don’t delay in correcting it.
The deadline to amend your 2022/23 tax return without penalties is 30 September 2024, though you have until 31 January 2025 as the final statutory deadline.
For those uncertain about their HICBC obligations or in need of expert advice, please contact our team today.