The High-Income Child Benefit Charge (HICBC) is a tax that affects households where at least one person with parental responsibility has a taxable income exceeding £50,000.
This charge applies regardless of who in the household receives the child benefit, and it is payable by the household’s highest earner.
The highest earner may have to pay back some or all of the child benefit received during each tax year.
The current scenario
The HICBC has been a source of confusion for taxpayers since its introduction in 2013.
Under the current rules, the highest earner in a household affected by the HICBC must register for Self-Assessment and submit tax returns every year to pay the charge.
This requirement can be perplexing for people with otherwise simple, straightforward tax affairs via PAYE, who may be unaware that they need to file a separate personal tax return because of the HICBC.
The Government, recognising the complexities of the current system, has announced plans to simplify the process for customers liable to the HICBC.
The proposed changes, as outlined in a recent legislation day documentation, include deducting the HICBC directly from salaries via the PAYE system.
This move aims to eliminate the need for those affected by the HICBC to register for Self-Assessment, thereby reducing administrative burdens for taxpayers and HMRC alike.
However, the specifics of how this new system would work in practice or the notification process for taxpayers are yet to be disclosed.
Advice for handling the HICBC
While further details on the proposed changes are still to come to light, it is crucial for taxpayers to understand their obligations under the current system.
If you, your partner, or anyone else in your household, earns over £50,000 and you are receiving child benefit, the highest earner will be liable for the HICBC.
You must, therefore, continue to register for Self-Assessment and submit a tax return each year to pay the charge.
The proposed changes to the HICBC system aim to simplify the process for taxpayers.
However, until these changes are implemented, it is essential to understand your current obligations and seek professional advice if needed.
If you are unsure about your tax obligations or how to handle the HICBC please contact us today.