Policy paper

The High Income Child Benefit Charge threshold

Published 6 March 2024

Who is likely to be affected

Individuals whose adjusted net income exceeds £50,000 in a tax year and where they or their partner may be eligible to claim Child Benefit.

General description of the measure

This measure increases the adjusted net income threshold for the High Income Child Benefit Charge (HICBC) from £50,000 to £60,000, from 6 April 2024.  

For individuals with income above £80,000, the amount of the tax charge will equal the amount of the Child Benefit payment. For those with income between £60,000 and £80,000, the rate at which HICBC is charged is halved, and will equal one per cent for every £200 of income that exceeds £60,000. The amount of Child Benefit payable will be unaffected by these changes.

Policy objective

This policy supports the government’s objective of supporting more parents with the costs of raising a child. Raising the HICBC threshold will ensure the charge continues to withdraw Child Benefit from high-income families as it was designed to do, by gradually withdrawing Child Benefit from individuals who have an adjusted net income in excess of £60,000, and fully withdrawing Child Benefit from individuals who have an adjusted net income of £80,000 or higher, without unfairly penalising those on middle incomes. By halving the rate at which HICBC withdraws the Child Benefit gain, the government is improving people’s incentives to continue working or take up more hours.

Background to the measure

This measure was announced at Spring Budget 2024.

The HICBC is a tax charge which was introduced in January 2013 for recipients of Child Benefit payments, or their partners, on higher incomes. It applies where Child Benefit recipients have, or their partner has, an adjusted net income of £50,000 or more. Adjusted net income is an individual’s total taxable income before any Personal Allowances and less certain tax reliefs, for example: trading losses (for the self-employed), Gift Aid charity donations, and pension contributions.

The tax charge is currently tapered and increases gradually for those with income between £50,000 and £60,000. This is equal to one per cent of a family’s Child Benefit for every £100 of income that exceeds £50,000 in a tax year, for the tax year 2023 to 2024. Where income is above £60,000 or higher the tax charge is equal to the total Child Benefit award.

Families have 2 options regarding Child Benefit. One option is to claim Child Benefit and receive payments, paying any HICBC due at the end of each tax year through Self Assessment. The other option is to claim Child Benefit but choose not to receive payments, and therefore not have to pay HICBC. This is known as ‘opting out’. However, individuals must pay any tax owed for each tax year up to the date they or their partner opt out of receiving Child Benefit payments.

Detailed proposal

Operative date

This measure will have effect from 6 April 2024, for the tax year 2024 to 2025 and subsequent tax years.

Current law

Chapter 8 of Part 10 of the Income Tax (Earnings and Pensions) Act (ITEPA) 2003 provides for the HICBC. 

Section 681B of ITEPA 2003 sets the starting HICBC adjusted net income threshold, and conditions to be met for the charge to apply.  

Section 681C of ITEPA 2003 details the amount of the HICBC to which a person is liable for a tax year and the calculation of the ‘appropriate percentage’.

Proposed revisions

Legislation will be introduced in Spring Finance Bill 2024 to amend section 681B to increase the HICBC starting threshold to £60,000. It will also amend section 681C to extend the HICBC taper to between £60,000 and £80,000, by amending the calculation of the appropriate percentage so that ‘L’ will be set at £60,000 and ‘X’ at £200.

New claims to Child Benefit are automatically backdated by three months, or to the child’s date of birth (whichever is later). For Child Benefit claims made after 6 April 2024, backdated payments will be treated for HICBC purposes as if the entitlement fell in the 2024 to 2025 tax year if the backdating would otherwise create a HICBC liability in the 2023 to 2024 tax year.

Summary of impacts

Exchequer impact (£ million)

2023 to 2024	2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029
0	-540	-635	-640	-645	-660

These figures are set out in Table 5.1 of Spring Budget 2024 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Spring Budget 2024.

Economic impact

Changes to the HICBC are expected to have labour market impacts. In their March 2024 Economic and Fiscal Outlook (EFO), the Office for Budget Responsibility (OBR) estimate that raising the threshold will increase the number of hours among those already working by a total equivalent of around 10,000 full-time individuals by 2028 to 2029.

Impact on individuals, households and families

Increasing the HICBC threshold will have a positive impact for around 485,000 families. This includes around 305,000 individuals currently paying the HICBC who will have this reduced, including 170,000 individuals who will no longer be liable for HICBC. The remaining 180,000 are the families currently not claiming Child Benefit or opting out of getting Child Benefit payments that are now eligible to receive payments for Child Benefit. Some individuals in the new claiming families may still be due to pay some HICBC under the new taper.

The measure could have a positive impact on family formation and stability for some families who may now choose to claim Child Benefit or opt back into getting payments to support their families as they gain financially. There is no impact on family formation, stability or breakdown for those families with individual incomes above £80,000, as they will be liable for HICBC, if they claim Child Benefit or opt back into getting payments.

This measure is expected overall to have no impact on an individual’s experience of dealing with HMRC as this does not change any processes or tax admin obligations. Individuals who will have income higher than the new HICBC starting threshold will continue to be required, as they are now, to complete a tax return to pay HICBC, if they or their partner get Child Benefit payments.

Equalities impacts

This measure applies equally to all Child Benefit claimants or their partners, where their income or their partner’s income, is above the current and new HICBC thresholds.

Using the latest data available from the 2020 to 2021 tax year, of those with a HICBC liability, 77% are male and 23% female. For the same year, of those with a claim for Child Benefit, 87% are female and 13% male. HMRC anticipate that a similar pattern will follow with this change.

It is not anticipated that these measures will impact on those in other groups sharing protected characteristics.

Impact on business including civil society organisations

There is no impact on businesses or civil society organisations as this measure only affects individuals.

Operational impact (£ million) (HMRC or other)

To support delivery of this measure, HMRC will need to make changes to guidance, legislation, forms and processes including IT systems and digital services. The overall costs of these changes are currently estimated to be in the region of £2.7 million. Additionally, HMRC anticipates it will be necessary to support customers who will now choose to claim Child Benefit, or those opting back into receiving Child Benefit payments due to the increase in thresholds. The costs associated with providing this support are still to be determined.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

This measure will be kept under review though information collected from tax receipts, and Child Benefit claims data.

Further advice

If you have any questions about this change, email the Income Tax Structure Team at: [email protected].