Child Benefit Updates

You may have heard about the recent changes to the High Income Child Benefit Charge which were announced in the Spring Budget.

This is something that will affect several of our clients, and the changes can influence whether claims are made for child benefit or whether those that have made claims and opted out of receiving payments, may not decide it is beneficial for them to receive the payments.

Child Benefit

Child Benefit is a financial support provided by the UK government to help parents or guardians with the cost of raising children. However, there’s an important consideration for high earners: the High Income Child Benefit Charge (HICBC).

Currently, you can get Child Benefit if you’re responsible for bringing up a child who is under 16, or under 20 if they stay in approved education or training. Only one person can claim Child Benefit, however there is no limit on the number of children for whom Child Benefit can be claimed.

You normally qualify for Child Benefit if you are responsible for a child under 16 and you live in the UK.

You’ll usually be responsible for a child if either:

you live with them.

you’re paying at least the same amount as Child Benefit (or the equivalent in kind) towards looking after them - for example on food, clothes, or pocket money.

There are benefits to making a claim for Child Benefit

The current rates for Child Benefit (tax year 2024/25) are:

Eldest or only child - £25.60 per week

Additional children - £16.95 per child per week

The benefit is paid every four weeks for each eligible child.

You will obtain National Insurance credits automatically if you claim Child Benefit, and your child is under 12. These credits are important, as they count towards your State Pension and can cover gaps in your National Insurance record if you’re not working, or if you do not earn enough to pay National Insurance.

Additionally, your child will automatically receive a National Insurance number without them having to apply for one - they’ll usually get the number shortly before they turn 16 years old.

Child Benefit 2024/25

Prior to tax year 2024/25 if either partner in a household had an individual adjusted net income of over £50,000, then whoever has the higher adjusted net income is responsible for paying the charge. If either partner had an adjusted net income over £50,000 each year, the higher earner would have to pay back 1% of their family’s child benefit for every £100 the higher earner earnt over £50,000 each year. This is known as the High Income Child Benefit Charge where the higher earner is required to pay back the full amount of Child Benefit and must do so through Self-Assessment.

If one partner had an adjusted net income over £50,000, they could still make a claim to Child Benefit, and to avoid paying the High Income Child Benefit Charge, they can opt out of receiving the payments. By doing this, they will still be eligible for the other advantages provided by Child Benefit, like National Insurance Credits etc.

The rules apply not only to households where the earners are married or in a civil partnership but also to households where couples are living together. This situation can result in a higher earner incurring the High Income Child Benefit Charge for a child that is not their own and for whom they are not the recipient of the Child Benefit.

From 6 April 2024, the threshold for the High Income Child Benefit Charge will change from £50,000 to £60,000. The rate at which the High Income Child Benefit Charge is charged, has also been halved, and is repayable at 1% for every £200 that exceeds £60,000. Where an individuals adjusted net income exceeds £80,000, they will be required to pay back the full amount of child benefit received and will do this through Self-Assessment.

This means that where individuals had put off claiming Child Benefit to avoid paying the High Income Child Benefit Charge, they may find that if their income is less than £80,000, they may wish to make a claim and receive benefits as they will receive more than they will need to pay back through the High Income Child Benefit Charge.

In all cases, it is important that a claim is made to Child Benefit, and ideally by the lower earner. This will then entitle the claimant to the benefits of Child Benefit, and they must then consider whether it is sensible to receive the payments for Child Benefit, or indeed opt out of receiving them.

If the higher earner’s adjusted net income exceeds £80,000 a claim for Child Benefit can still be made, although to avoid the High Income Child Benefit Charge, they may wish to opt out of receiving Child Benefit Payments. By doing so, the other benefits realised by claiming Child Benefit will be available.

The fairness of the Child Benefit system is still in dispute, and many feel that it is not fair that a household with two parents earning £98,000 can still receive Child Benefit in full, but a single parent household earning more than £60,000 (from 2024/25), loses some or all of their Child Benefit through the High Income Child Benefit Charge.

The Government have recognised this, and plans to redress this by April 2026, by possibly moving to a system based on household income rather and individuals’ income, so there are more changes to come!

Claiming

If individuals had previously not claimed due to the High Income Child Benefit Charge, may now be considering making a claim. They can do this in the HMRC app https://www.gov.uk/guidance/download-the-hmrc-app or online https://www.gov.uk/child-benefit/how-to-claim. It is important to remember that where one of the partners adjusted net income exceeds £60,000 for 2024/25, if they chose to receive Child Benefit payments, they will be required to complete a Self-Assessment return to pay any High Income Child Benefit Charge applicable.

It is also worth bearing in mind, how individuals can reduce their adjusted net income e.g.

Donations made to charities through Gift Aid (Taking off the grossed up amount)
Pension contributions paid gross (before tax relief)
Pension contributions where their pension provider has already given tax relief at the basic rate – take off the grossed up amount.

New claims for Child Benefit or applications to re-start previous claims can be backdated for 3 months, or to the date of birth of the child if this is later.

New Child Benefit claims made on or after 6 April 2024 and before 5 July 2024 will result in payments being backdated but will be subject to the charge in the 2024 to 2025 tax year, if the income exceeds the new threshold of £60,000.

For instance, if a new claim is made on 6 May 2024, the Child Benefit payment will be backdated to 6 February 2024, but you will only pay the charge in the 2024 to 2025 tax year if your income exceeds £60,000.

The person with the higher adjusted net income will need to file and pay any 2024 to 2025 charge via Self-Assessment by 31 January 2026.

The content produced and presented by Streets is for general guidance and informational purposes only. It should not be construed as legal, tax, investment, financial or other advice. Furthermore, it should not be considered a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset. The information provided by Streets is of a general nature and is not specific for any individual or entity. Appropriate and tailored advice or independent research should be obtained before making any such decisions. Streets does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of obtaining Streets' visual or audible content.

The content used by Streets has been obtained from or is based on sources that we believe to be accurate and reliable. Although reasonable care has been taken in gathering the necessary information, we cannot guarantee the accuracy or completeness of any information we publish and we accept no liability for any errors or omissions in material. You should always seek specific advice prior to making any investment, legal or tax decisions.