Increase High Income Child Benefit Charge threshold and base on household income

We want the Government to reform the High Income Child Benefit Charge (HICBC) by increasing the income threshold for this charge to take into account inflation since 2013, and make it apply to household income, not individual income.

Due to the Government’s policy of not increasing the threshold for HICBC, this charge now affects 1 in 5 families, raising over £1 billion each year for HMRC.

We believe the way the charge works is outdated and does not take into account inflation since 2013 or household incomes. Inflation means that the current £50,000 threshold is no longer a high income, and basing the charge on individual, rather than household income, means some households liable for the charge have lower incomes than households that do not have to pay the charge.

The Government aims to manage the public finances in a disciplined and responsible way in order to protect our vital public services. The HICBC targets Child Benefit expenditure, meaning that the Government can support the majority of families whilst ensuring the fiscal position remains sustainable. Indeed, in 2020-2021 (the latest year that data is available), 99.7% of those liable for the High Income Child Benefit Charge (HICBC) paid income tax at the higher rate or above, and 88% of Child Benefit claimants were unaffected by the HICBC.

The HICBC is calculated on an individual rather than a household basis, in line with other tax policy. Basing the HICBC on household income would require all of the 7.7 million households currently registered for Child Benefit to regularly report income data, for HMRC to verify household income and ensure compliance with the charge. This would complicate the process for the majority of Child Benefit claimants who are not liable to the HICBC. The Government therefore considers that the current approach remains proportionate, as it only requires a proportion of individuals to complete a Self Assessment tax return, whilst leaving the majority of claimants unaffected.

As with all other tax policy, the Government will keep the HICBC under review. Improvements to the HICBC have been announced as part of the Government's commitment to a simpler and fairer tax system. On 28 April, the Government announced that steps will be taken to allow parents to receive a National Insurance credit retrospectively. This will ensure that parents who were eligible to claim Child Benefit but who chose not to are able to protect their future State Pension entitlement, reaffirming the Government's commitment to supporting all parents.