The High-Income Child Benefit Charge, or HICBC, is a tax, impacting households where at least one person looking after the child earns more than £50,000 a year.
This tax applies no matter who in the house gets the child benefit, and the person who earns the most has to pay it.
The person who earns the most might have to give back some or all of the child benefit they received during the tax year.
Since HICBC started in 2013, it’s been confusing for a lot of people.
Right now, the person earning the most in a house affected by the HICBC has to sign up for Self-Assessment and send in a tax return every year to pay the tax.
This can be confusing for people whose taxes are normally straightforward through the PAYE system. They might not realise they have to do a separate tax return because of the HICBC.
The Government knows the current system is confusing and has said they want to make it easier for people who have to pay the HICBC.
The changes they’re thinking about were outlined in a recent document. They’re considering taking the HICBC directly out of people’s wages through the PAYE system.
This would mean people affected by the HICBC wouldn’t need to sign up for Self-Assessment. This would make things easier for people paying the tax and HM Revenue & Customs (HMRC).
However, it is still uncertain exactly how this new system would work or how people will be told about it.
Advice on the HICBC
While further details on the changes are yet to be disclosed, it is important to understand how the current system works.
If you or anyone else in your house earns over £50,000 and you get child benefit, the person who earns the most will have to pay the HICBC.
You need to keep signing up for Self-Assessment and sending a tax return every year to pay this tax.
The planned changes to the HICBC should make things easier. But until then, you need to know how things work now. If you need help, it is important to get advice.
If you’re not sure about your tax responsibilities or how to deal with the HICBC, please get in touch with the Macalvins experts today.