The High Income Child Benefit Tax Charge (“HICB”) has been around since January 2013, and most families are aware of its existence. However, there are still aspects of the HICB about which affected families must take notice. And we still find people who are totally unaware that it exists.
The basic rule
You may have to pay the HICB tax charge if you or your spouse, partner have income in excess of £50,000 and either:
- You or your partner get Child Benefit;
- Someone else gets Child Benefit for a child living with you and they contribute at least an equal amount towards the child’s upkeep.
Despite this tax being around for over six years, a surprising number of people still end up with fines.
Contrary to popular belief, this charge affects unmarried people too.
Receiving an unexpected bonus at work could have the unwelcome effect of having to repay some or all of the Child Benefit.
Changes in living arrangements
Many families get caught out because of sudden changes in income or changes in living arrangements.
The fines and tax involved can be very substantial, particularly if there are several children.
Loss of State Pension
If you are affected by the tax charge, you can choose not to get the Child Benefit payments, but you should still fill in the Child Benefit claim form. This will help you get National Insurance Credits which count towards your state pension – to qualify for the full state pension you need to clock up 30 qualifying years.
This is particularly important if you are a stay at home Mother or Father – if you take a lot of years out of work to raise children, then you can apply for child benefit but not actually receive the money. It will also save the person receiving the income of over £50,000 having to submit a tax return.
Claiming Child Benefit also means that your child will automatically get their National Insurance Number shortly before they are 16 – they will not have to apply for one themselves.
We strongly advise you to seek appropriate advice before taking action on any of the points listed above.
All information contained in this document are correct at the time of writing. Legislation and regulations may change at any time.
If you are in any doubt, please call us for clarification.
About us: Leggate Associates Limited was formed by Andrew Leggate LL.B FCMA FCA CGMA who has over 35 years of tax and accountancy experience in industry and practice, and the practice is managed by Joanne Leggate FMAAT ATT. Our clients range from building subcontractors to multi-million pound concerns and high net worth individuals all over the UK. Please see our website www.leggateassociates.co.uk or follow @LeggateAssoc on Twitter for occasional updates.
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