Alteration in Child Benefit Tax Return Regulations – Understanding the High Income Child Benefit Penalty
Get the Lowdown on the High Income Child Benefit Charge (HICBC) Simplification
Gotta love those tax changes? Well, brace yourself for an exciting one! High-earning parents can soon save time by paying the High Income Child Benefit Charge (HICBC) directly through their payslips. Yeppers, bye bye to those dreaded tax returns!
This bit of news is part of a fresh wave of tax updates unveiled in the Spring Statement. More on those deets later!
Starting from the sweltering summer days, employees who owe the HICBC will have a breeze reporting their kiddies' child benefit payments using a snazzy digital platform. They can even opt to pay the charge directly through PAYE, without any hassle of registering for self-assessment.
Labour previously hinted, during the Autumn Budget, that they intended to streamline the kiddo-benefit system, allowing employed individuals to pay the charge through their tax codes as early as 2025. So, this move is coming sooner than we thought!
Now, let's break it down: Just what is this HICBC, you ask?
Breakin' Down The HICBC
The HICBC is essentially a little-known tax charge for parents who claim child benefit but have an individual income that's more than £60,000 for the 2024-2025 tax year (or '60 grand' in colloquial terms).
Make sense of the earnings limbo? Let's simplify it. Suppose you make above £60,000 a year, and you or your partner claim child benefit; you gotta pay the HICBC! Wanna know the nitty-gritty? Look no further!
If you're between £60,000 and £80,000, you pay a percentage of the child benefit based on your earnings. If you're earning more than £80,000, it's game over; you gotta pay the whole darn thing!
Thinkin' your pension is safe? No worries, mate! pension contributions are subtracted from your income before the assessment.
Pay That HICBC!
Wait a sec! How do you currently dish out the HICBC dough? Simple: you gotta register for self-assessment, complete a tax return yearly, and cough up the cash. But hold on! This might change this very summer, with parents able to report their kiddies' child benefit payments through a digital service and pay the HICBC directly through changes to their PAYE tax codes.
Chartered financial planner Sean McCann, of financial advisory firm NFU Mutual, reckons this is gonna be a game-changer, saying: "This will make life easier for those employees who have never completed a tax return."
Alice Haine, a personal finance analyst at investing platform Bestinvest by Evelyn Partners, agrees, adding, "The HMRC app is user-friendly, and adding a HICBC PAYE digital service to its suite of services should hopefully ensure more parents receive child benefit or don't miss out on National Insurance credits."
And we ain't forgetting those parents who forks over their due dimes without knowing the deets orgettin' caught up in a tangle with HMRC. Scary stuff!
McCann warns, "From 2022-23, HMRC sent out over 127,855 reminders for those neglecting to pay the HICBC, with the risk of interest payments and fines."
Got any tips on avoiding or reducing that HICBC? Experts recommend salary sacrifice, "pension" shenanigans, or hornin' in on an employer's flexible work hours. And remember, those National Insurance credits are crucial for your state pension!
So, high-earnin', child- lovin' parents, get ready to heave a sigh and say goodbye to those pesky tax returns, because changes are comin' this summer! You can thank Labor and this Spring Statement for that!
- With the High Income Child Benefit Charge (HICBC) set to be paid directly through payslips, individuals claiming child benefit but earning over £60,000 can anticipate a simpler personal-finance situation, as they will no longer be required to complete tax returns.
- For those who currently pay the HICBC, another exciting update is the prospect of reporting their child benefit payments through a digital platform and making the payments via PAYE adjustments to their tax codes, making the process more streamlined and personal-finance friendly.
- In the broader context of personal finance, strategies like salary sacrifice, pension contributions, and opting for flexible work hours can potentially help some parents reduce the impact of the HICBC, ensuring they don't miss out on National Insurance credits essential for their state pensions.