In light of the Spring Budget’s updates to the High-Income Child Benefit Charge (HICBC) thresholds, it is crucial for families, particularly those with fluctuating incomes, to re-evaluate their eligibility for child benefit.

The Government has revised income brackets, significantly impacting families with a highest-earning taxpayer earning no more than £80,000 per annum.

As the deadline of 5 July 2024 approaches, timely registration (or re-registration) for Child Benefit is essential to maximise entitlement without forfeiture of payments.

Understanding child benefit and the high-income charge

Child benefit stands as a key component of the UK’s family support system, offering a regular payment to assist with the costs of raising children.

For the fiscal year 2024/25, the benefit is set at £25.60 per week for the first child and £16.95 per week for each additional child.

It covers children up to the age of 16 or 20 if they continue in approved education or training.

Contrary to some misconceptions, child benefit itself is not subject to income tax and is paid tax-free to all eligible recipients, regardless of their income level.

However, families where the highest earner’s income exceeds £60,000 are subjected to the HICBC, which effectively reduces the net benefit for these households through a tax charge.

This means that while the benefit itself is not taxed, the HICBC can diminish the financial advantage it provides to higher earners.

The HICBC is a tax charge designed to recoup child benefits in part (or fully) from families where the highest earner’s income exceeds £60,000.

The tax charge escalates by one per cent of the child benefit received for every £200 of income above £60,000 up to £80,000.

(So, at £70,000 you’ll be paying back 50 per cent of the payments). 

At £80,000, the charge nullifies the child benefit entirely.

The mechanism ensures that the benefit more accurately targets families in greater need, while still encouraging all eligible families to register.

Registering for child benefits can also secure National Insurance credits towards the state pension, and it ensures children are automatically issued a National Insurance number at age 16, even if the benefit payments are not received due to the HICBC.

How to re-register for child benefit

For families who previously opted out due to the HICBC but now find themselves within the revised eligibility criteria, re-registering for child benefit is straightforward.

The process involves filling in an online form through the Government Gateway or contacting the Child Benefit Office directly.

Applicants must provide essential information such as the child’s birth or adoption certificate, bank or building society details for payment, and both parents’ National Insurance numbers.

The ability to backdate claims is limited to just three months, underscoring the importance of acting swiftly, particularly in light of the 5 July 2024 deadline.

This deadline is going to be pivotal for families wishing to maximise their entitlement without the risk of losing benefits due to delays in registration.

Navigating income fluctuations and child benefit

Income variability poses a significant challenge for families in determining their eligibility for child benefit, particularly for those with irregular earnings from overtime, bonuses, or self-employment.

The revised income threshold necessitates a proactive approach to registration, as waiting until the end of the fiscal year to assess eligibility could result in lost benefits due to the three-month backdating limit.

Families are advised to utilise the Child Benefit tax calculator to estimate their adjusted net income and ascertain potential liability under the HICBC.

Furthermore, strategic financial planning, such as increasing pension contributions, can effectively reduce adjusted net income, potentially mitigating the impact of the HICBC.

With the upcoming deadline and the adjustments to the income thresholds for the HICBC, families must reassess their eligibility for child benefit.

Timely action is going to be essential to secure entitlements and ensure continued support in raising children.

For more information, or for tailored guidance on this issue, please get in touch with our team.