The HICBC applies to individuals or their partners who receive Child Benefit and have an adjusted income of over £60,000 per year. If both partners’ incomes exceed £60,000, the charge applies to the partner with the higher income. This changed from income over £50,000 per year prior to April 2024.

The HICBC effectively reduces the value of Child Benefit as your income increases above the £60,000 threshold. For every £200 of adjusted net income above this limit, 1% of the Child Benefit must be repaid as tax. Once income reaches £80,000 or more, the entire benefit amount is effectively repaid through the charge.

Since 6 April 2024, it has been worth:

• £25.60 a week for the eldest or only child
• £16.95 a week for younger children

The government has confirmed that most benefits will increase by 1.7% in April 2025. This means child benefit will be worth:

• £26.05 a week for the eldest or only child
• £17.25 a week for younger children

Lets assume you claim for one child and have received £1331.20, annually in Child Benefit and your adjusted income is £70,000:

• Income over the threshold: £70,000 – £60,000 = £10,000.
• Percentage of Child Benefit to be repaid: (£10,000 / 200) = 50%.
• Tax charge: 50% of £1331.20 = £665.60.

This £665.60 would be added to your Self-Assessment tax bill.

There are several ways to manage the impact of the HICBC:

• Opting Out of Child Benefit Payments: If you anticipate your income exceeding the £80,000 threshold, you can choose to stop receiving Child Benefit payments to avoid the charge. However, it is still important to complete the Child Benefit application to ensure you receive National Insurance credits that count toward your State Pension.
• Monitoring Adjusted Income: Adjusted income includes total taxable income minus certain deductions like Gift Aid donations or pension contributions. Making pension contributions or charitable donations can reduce your adjusted income and potentially lower or eliminate the HICBC.
• Tax Planning with an Accountant: Effective tax planning with the guidance of a professional accountant can help you navigate complex rules, optimise your tax position, and ensure compliance with HMRC requirements.

Failing to declare Child Benefit on your Self-Assessment tax return can result in penalties and interest charges from HMRC. Since the introduction of the HICBC, many taxpayers have inadvertently found themselves in non-compliance simply by not understanding the rules. Regularly reviewing your financial situation and seeking professional advice is essential to avoid these pitfalls.