Understanding the High Income Child Benefit Charge

HMRC commissioned research into claimants’ understanding of the High Income Child Benefit Charge (HICBC).  The research entitled, “High Income Child Benefit Charge: awareness, understanding and decision-making processes” was carried out by IFF Research and comprised 42 face-to-face and three phone interviews with parents of children aged under 16 (or under 20 if in full time education), who were in a household where at least one adult had an annual income of at least £50,000.  The research considers aspects such as what are the benefits of claiming Child Benefit and the reasons as to why some people don’t claim.

It was found that while most had a good understanding of most aspects of Child Benefit there was lower knowledge of the charge itself and very limited awareness of the other benefits of claiming, namely: the ability to qualify for National Insurance credits which count towards the State Pension; the ability to qualify for other benefits, such as Guardian’s Allowance; and juvenile registration, that is, the process whereby children are automatically allocated a National Insurance number shortly before their 16th birthday.

While some paid via self-assessment, a minority did not even realise they were liable for the charge and thought it was HMRC’s responsibility to inform them.  In looking at the group who chose to opt-out, many did so as they did not want to be faced with the administration burden of having to complete a tax return.  Surprising to us, the most common misconception held by respondents was that individuals are not eligible to claim Child Benefit if their income is over the £50,000 HICBC threshold. Given that there are planning opportunities available to reduce a claimants’ income for the purposes of the charge, advisers are well equipped to advise relevant client to whom this applies.