Sarah Bradford explains how to reinstate child benefit following changes to the high income child benefit charge from April 2024.
The high income child benefit charge (HICBC) claws back child benefit where either the claimant or their partner has adjusted net income in excess of the trigger threshold.
The threshold increased from 6 April 2024, while the clawback rate was reduced from the same date. As a result of these changes, many parents who previously lost all the child benefit to the charge will now be able to keep some or all of it, and where they had previously opted not to receive child benefit, they will need to restart their payments.
Nature of the HICBC and recent changes
The payment of child benefit is not itself means tested; instead, the HICBC charge works to restrict the benefit to those parents where neither the claimant, nor their partner if they have one, has adjusted net income in excess of the trigger threshold. Where both the claimant and their partner have adjusted net income in excess of the trigger threshold, the charge is levied on the higher earner.
The charge is paid through the self-assessment system. The person who is liable for paying the charge must complete the relevant section of the self-assessment form. If they are not already within self-assessment (for example, because they are paid under PAYE and have no other income to declare), they will need to register for self-assessment. Where the liability falls on the claimant’s partner, this can be problematic if they do not know that their partner has claimed child benefit or whether their partner’s adjusted net income is higher than theirs, and they may be unaware of their liability to declare and pay the HICBC. Interest and penalties may arise if the liability is not notified to HMRC, and the charge is paid late. A person who is aware that their partner receives child benefit but does not know who has the higher income can write to HMRC to find out if they cannot obtain the information from their partner. HMRC will not reveal their partner’s income, only replying ‘yes’ or ‘no’ to the question of whether it is higher.
For 2023/24 and previous tax years, the HICBC applied where either the claimant or their partner had adjusted net income of more than £60,000. The charge is equal to 1% of the child benefit paid for the tax year for every £100 by which adjusted net income exceeded £50,000. Once adjusted net income reached £60,000, the charge was equal to the child benefit paid for the tax year.
From 2023/24, the trigger threshold is increased to £60,000 and the clawback rate is reduced to 1% for every £200 by which adjusted net income exceeds £60,000. Consequently, the HICBC is now only equal to the child benefit for the year where adjusted net income of the claimant or their higher-earning partner is at least £80,000.
Impact of the changes on child benefit claims
For 2023/24 and previous tax years, a claimant may have opted not to receive their child benefit if they or their partner had adjusted net income of £60,000 or more as they would have to pay back all the child benefit that they received in the form of the HICBC.
However, as a result of the changes that apply from 6 April 2024 onwards, for 2024/25, they will be able to keep some or all of their child benefit if the adjusted net income of the claimant or their higher earning partner is less than £80,000.
Scenario 1: Claimant or higher earning partner has adjusted net income of £60,000
For 2023/24 and previously, where the adjusted net income of the claimant or their higher earning partner was £60,000, the HICBC charge was equal to their child benefit for the year. However, with the increase in the trigger threshold to £60,000 for 2024/25, assuming the adjusted net income of the claimant or their higher earning partner remains at £60,000, they will no longer be within the scope of the HICBC and will be able to keep their child benefit in full. If they opted for their child benefit not to be paid, they will need to restart their payments to ensure that they receive the child benefit to which they are entitled.
Scenario 2: Claimant or higher earning partner has adjusted net income of more than £60,000 but less than £80,000
In this situation, for 2023/24 and previously, the HICBC would be equal to the child benefit for the tax year. However, for 2024/25, while the charge will still apply, it will be less than the full amount of the child benefit paid for the year. For example, where the charge is based on adjusted net income of £70,000, for 2023/24, it is equal to 100% of the child benefit for the year. However, for 2024/25, the charge is reduced to 50% of the child benefit for the year ((£70,000 - £60,000)/£200 x 1%). Consequently, where payments have been stopped, it will be beneficial to restart them and put some of the money aside to pay the HICBC so that they can keep the remaining 50% of the child benefit to which they are entitled.
Scenario 3: Claimant or higher earning partner has adjusted net income of at least £80,000
Where the charge is based on adjusted net income of at least £80,000, it remains at 100% of the child benefit for the tax year, despite the changes from April 2024. Where the claimant has opted not to receive the benefit to avoid repaying it in full, there is no benefit in restarting payments, only to repay them back to HMRC.
Restarting payments
Payments can be restarted by using the online service or by completing the online form (see www.gov.uk/child-benefit-tax-charge/restart-child-benefit). Alternatively, HMRC can be contacted by phone on 0300 200 3100 or by post by writing to them at the following address:
HM Revenue and Customs – Child Benefit Office
PO Box 1
Newcastle upon Tyne
NE88 1AA.
It should be noted that it can take up to 28 days from the date that the Child Benefit Office receives the request before the first payment is made. The Child Benefit Office will write to the claimant to let them know the amount of any backdated payments that they will also receive.
Importance of claiming
National Insurance credits are automatically awarded where child benefit is claimed in respect of a child under the age of 12. These provide a qualifying year for state pension purposes.
It is therefore important to claim the benefit even if the claimant opts not to receive it in order to preserve entitlement to the National Insurance credits, particularly if the claimant does not receive other credits or pay sufficient National Insurance for the year to be a qualifying year otherwise.
Looking ahead: Possible move to household income
Currently, the HICBC is based on the adjusted net income of the claimant or their higher-earning partner. This creates anomalies in that a couple where both partners earn £60,000 (combined income of £120,000) are able to retain the full amount of their child benefit), whereas a single parent with income of £80,000 will lose all of their child benefit to the charge.
To address this, at the time of the Spring 2024 Budget the then Chancellor announced plans for the charge to be based on household income from April 2026. However, this will necessitate HMRC collating household income figures, something which they currently do not do. Further, following the change of government, it remains to be seen whether this change will go ahead.
Practical tip
Child benefit claimants whose income or that of their higher-earning partner is between £60,000 and £80,000 should restart their child benefit payments if they opted not to receive them, as from 2024/25 the HICBC will be less than the child benefit that they receive.
