Children have become less taxing!

From 6 April 2024, there have been major changes to the High-Income Child Benefit Charge (HICBC), which (as discussed in the Spring Newsletter) effectively claws back Child Benefit via a tax charge when income of the higher earner in the household exceeds a particular threshold.

The key changes are:

● The income threshold before a clawback starts increased to £60,000 (from £50,000).
● The rate of clawback will be 1% for each £200 (not £100, the previous rate) of income above £60,000. So, 100% of the Child Benefit is now not clawed back until income reaches £80,000, a big increase on the previous £60,000 threshold. These changes will mean that a lot of families with young children will have a significant increase in their spending power this year.

Example

Frank is a househusband, whose wife Cheryl has income of £65,000 and claims child benefit for each of her 4 children.
Child benefit rates per week are:
2023/24: 1st child: £24; subsequent children: £15.90.
2024/25: 1st child: £25.60; subsequent children: £16.95.
Cheryl’s Child Benefit claims are:
2023/24: [(£24.00 x 52) + (3 x £15.90 x 52)] =£3,728
2024/25: [(£25.60 x 52) + (3 x £16.95 x 52)] =£3,975
HICBC

2023/24:

With income of over £60,000, Cheryl will suffer HICBC equal to the child benefit received. 2024/25: With the lower threshold now £60,000 and income of £65,000, she will suffer HICBC of 25% of £3,975, i.e. £993.75. As a result of these new rules, Cheryl and her husband’s increase in net cash from child benefit for 2024/25 is 75% of £3,975 = £2,981.25. Reinstating Child Benefit payments Some people who have previously opted out of receiving Child Benefit will now want to reinstate their claims. To do so, you need to either:
● fill in an online form via the
government gateway; or
● contact the Child Benefit Office. After the Child Benefit Office gets your request, it can take up to 21 days before you get your first payment. The office will write to tell you how much money you’ll get from backdated payments (if any). Payments can normally be backdated for up to three Remember that, if you reinstate months. payments, you will potentially need to file a tax return to deal with any HICBC. Please contact us if you have any questions about the impact of HICBC on your family’s finances.
Note that, from 6 April 2026, it is intended that HICBC will be based on household income, rather than just that of the higher income generator.

Salary advances

Normally, under Real-Time Information (RTI), PAYE reporting must be done on or before the time when a payment is made to the worker. From 6 April 2024, there is a change in the rules for reporting
of salary advances, which can now be reported on or before the employee’s contractual pay day. This avoids having to report the advance and the regular salary payment separately. Effectively, the reporting of the advance will be delayed until the remainder of the salary instalment is paid.
Note that the change only applies to advances of pay already earned by the time the advance payment is made.
Please talk to us if you have any concerns about your PAYE reporting, as the penalties for getting things wrong can be onerous.