The Higher Income Child Benefit Charge (HICBC) was introduced in January 2013. Individuals with income over £50,000 per annum are liable to pay an income tax charge on Child Benefit payments they or their partner receive. Read more on the HICBC here
How could Covid-19 impact the HICBC?
The pandemic has seen many employees and the self-employed being furloughed, made redundant, or making lower profits. As a consequence their income for 2020/21 may fall below the £50,000 limit at which child benefit starts being taxed.
The charge is 1% for every £100 that adjusted net income exceeds £50,000 multiplied by the child benefit claimed in respect of the children. Note that the rate of Child benefit increased from 6 April to £21.05 a week for the eldest child and £13.95 for each additional child.
What should individuals do?
Many couples with income over £60,000, when the benefit is fully taxed stopped, claiming Child Benefit rather than have to repay it back in tax. They should therefore reinstate their claims if the income of the higher paid taxpayer could drop back below £60,000.[1]
If you need any help calculating the tax liability on child benefit or you need a tax return completing please contact Avanti.
Reproduced from 2020 Innovation