In the budget the chancellor announced changes to the way the HIBC is calculated.
Currently a parent/guardian earning over £50,000 must repay some or all of the benefits received, as well as needing to complete a self-assessment tax return.
What are the changes?
The earnings threshold has been increased to £60,000 from April 2024, with a commitment to change the scheme in April 2026 so that the charge is based on household income rather than an individual basis. The rate at which HIBC will be clawed back is equal to 1% of child benefit for every £200 of income above the threshold. This means that the benefit is fully withdrawn where an individual earns more than £80,000 (currently £60,000).
The HIBC has been widely criticised due to the unfairness of how the charge applies to the higher earner within the household, so where the income limit is breached by one individual the charge applies. A dual income couple each earning £49,999 would not be subject to a charge, however one with an income of £50,001 and one non-earner would be subject to a charge. This system is also unfair to single parents therefore a change to household income would redress this imbalance.
The move to household income from April 2026 will be a challenge for HMRC’s data collection, as our tax system operates under an independent taxation of individuals. This change to household income will require additional resources by HMRC an already strained system.
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