New Child Benefit Threshold

26th March 2024 | Tax

Important Changes to Child Benefit and High Income Child Benefit Charge

The landscape of child benefit and its associated charges is undergoing significant changes, prompting approximately 180,000 families to reassess their entitlements and financial strategies. Effective from 6th April 2024, alterations to the High Income Child Benefit Charge (HICBC) thresholds are poised to impact household finances across the UK.

Understanding the High Income Child Benefit Charge:

The HICBC functions as a mechanism to recover child benefit payments entirely if the adjusted net income of the highest earner in the household surpasses certain thresholds. Under this scheme, there's a gradual reduction of child benefit when household income falls between specified lower and upper thresholds. Typically administered through self-assessment, individuals may have opted not to claim child benefit or declined to receive payments to avoid dealing with the HICBC.

Changes to Thresholds and Considerations:

As announced during the Spring Budget 2024, adjustments to the HICBC thresholds have been enacted. Notably, the lower threshold has been raised from £50,000 to £60,000, while the upper threshold has increased from £60,000 to £80,000 effective from 6th April 2024. These amendments signal a potential shift in the financial implications for individuals, prompting those who previously opted out of claiming child benefit to reconsider their stance.

Revisiting Child Benefit Claims:

For instance, individuals earning £65,000 annually faced full clawback of child benefit for the 2023/24 period. However, with the revised thresholds, only 25% of child benefit will be subject to clawback for the 2024/25 period. Consequently, individuals may find it advantageous to claim child benefit to retain 75% of the entitlement.

Claiming Child Benefit:

Claiming child benefit or opting to receive payments can be easily facilitated through HMRC's app or online claim form. Notably, child benefit can be backdated for up to three months or from the child's date of birth if later. Backdated claims are attributed to specific tax years, influencing the application of HICBC.

Future Considerations and Benefits:

Apart from immediate financial considerations, claiming child benefit can also safeguard entitlements to contributory benefits, including the state pension. The government's acknowledgment of potential missed entitlements has led to plans to introduce a route for parents and carers to apply for National Insurance Contribution (NIC) credits, starting from April 2026.

Upcoming Changes to HICBC:

Looking ahead, the government intends to consult on altering the basis of HICBC application from individual income to household income by April 2026, further signalling potential shifts in financial planning strategies.

As the regulatory landscape evolves, individuals are urged to re-evaluate their entitlements and financial decisions concerning child benefit. With changes to HICBC thresholds and future adjustments on the horizon, staying informed and proactive is crucial to making informed financial choices.

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