Tax charity calls for child benefit threshold to be raised

Tax charity calls for child benefit threshold to be raised

The threshold from which parents start to pay back child benefit should be increased to help support families through the cost-of-living crisis, the Association of Taxation Technicians (ATT) has said.

In a representation to the UK Government ahead of the Spring Budget, the ATT says the level at which the High Income Child Benefit Charge (HICBC) applies should be raised to reflect changes in inflation since it was introduced in 2013.

The HICBC was designed to claw back child benefit from those on a “high” income. Since 2013, the HICBC has been payable where a household receives child benefit and at least one person in the household with parental responsibility has taxable income in excess of £50,000. Regardless of who in the household receives child benefit, the HICBC is payable by the household’s higher earner. Once that individual earns over £60,000, they have to pay back all of the child benefit received.

These thresholds have been frozen for 11 years, while the rate of inflation over the same period has been 34%.2 If the HICBC thresholds had been updated in line with inflation, clawback of child benefit would begin at £67,100 of income, with the full amount repayable at £80,500.

Jon Stride, vice chair of the ATT Technical Steering Group, said: “Updating the HICBC threshold for inflation would accommodate wage growth and increases in the cost of living since 2013, allowing working families to keep more of the child benefit they receive.

“In a trying time for families across the country, it would also provide a welcome respite from rising costs.”

The ATT added that if the government is unwilling to raise the threshold in line with inflation, it should at least be aligned with the income tax higher rate threshold of £50,270 in England and Wales, which is expected to be frozen until 2028.

Jon Stride added: “The point from which the HICBC applies has remained at £50,000 since its introduction which means it can now affect basic rate taxpayers. This is directly contrary to the original policy intent, which envisaged that the charge should only affect families where one parent or their partner is a higher-rate taxpayer.

“Aligning the HICBC threshold with the higher rate income tax threshold would represent a tax simplification as basic rate taxpayers would never need to consider it.”

The ATT would also like any revised thresholds to be increased in line with inflation year on year, to avoid the problem returning in the future.

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