The high income child benefit charge (HICBC) has previously only been payable via self-assessment. But a new process might mean no more tax returns if you’re liable. What’s the full story?
Benefit. Child benefit is paid to any household that includes eligible children. The initial award is not means tested. However, if the claimant or their partner has income that exceeds the clawback threshold (currently £60,000), the amount awarded is clawed back via the self-assessment system.
Partner? A major criticism of the high income child benefit charge (HICBC) is that it has punished taxpayers, including those who aren’t receiving the payments, by forcing them into self-assessment, or making them liable to penalties for failing to notify HMRC, when they weren’t aware of their responsibility. Has the change in policy affected this?
Collection. Unfortunately, the new system isn’t much of an improvement. All it does is make it easier for the liable party to pay.
Tip. The light at the end of the tunnel is that you might be able to get out of the self-assessment net.
Service. HMRC is writing to around 100,000 individuals who appear to be liable to the HICBC, but who aren’t in self-assessment, to encourage them to use the service. It’s touted as “a welcome move to reduce the complexity for many individuals by taking them out of self-assessment”.
Trap. Individuals will still need to monitor their liability to the HICBC. The only difference is that they won’t need to register for self-assessment if they spot the liability early enough.
Opt out? If you know you’ll be liable to the full HICBC, it might be worth opting out of receiving it. Tip. Even if you opt out, you should still register for child benefit. It credits a non-working parent with a qualifying NI contribution and allows your child to be issued with an NI number automatically, otherwise they will need to apply for one online when they turn 16.
The “new” system means you can pay the HICBC without needing to submit a tax return. It doesn’t mean you won’t be liable to the charge. Consider claiming child benefit anyway to accrue contribution-based benefits that you or your partner would otherwise miss out on.