The UK’s Child Benefit system is a crucial financial support for millions of families, providing regular payments to help with the costs of raising children. As we enter 2024, several important updates and reforms are coming into effect, making it essential for families to stay informed. This article will explore the changes to Child Benefit in 2024, particularly focusing on updates around the High Income Child Benefit Charge (HICBC), payment rates, and the implications for single- and dual-income households.
What Is Child Benefit?
Child Benefit is a government payment aimed at supporting families with children under 16 (or under 20 if they are in full-time education or training). As of 2024, the weekly payment rates are:
For the oldest or only child, £24.00 per week.
£15.90 per week for each additional child.
These payments are not means-tested, meaning most families can claim them regardless of income. However, the High Income Child Benefit Charge applies to higher-income households, which can reduce or eliminate the benefit for some families.
Key Changes to High Income Child Benefit Charge (HICBC)
One of the most significant updates to Child Benefit in 2024 involves the High Income Child Benefit Charge (HICBC), which applies to households where one parent or guardian earns over a certain threshold. Here are the main changes:
Threshold Increase: From April 6, 2024, the threshold for the HICBC will increase from £50,000 to £60,000. This is the first increase since 2013, and it is designed to help families keep more of their Child Benefit.
Reduction in Benefit: Once the household income exceeds £60,000, the charge gradually reduces the benefit by 1% for every £200 earned above this threshold. Families earning over £80,000 will have the entire benefit reclaimed.
Impact on Households: This change is expected to benefit around 170,000 individuals, as they will no longer be subject to the HICBC. Additionally, approximately 485,000 families will experience reduced liabilities.
Household Income vs. Individual Income: Future Changes
One of the criticisms of the current HICBC system is that it disproportionately affects single-income families. For instance, a single-income household where one parent earns £60,000 may lose Child Benefit, while a dual-income household where each parent earns just under £60,000 would not be affected. This discrepancy has led to calls for reform.
In response, the government has announced that by April 2026, Child Benefit will be assessed based on total household income, rather than the income of the higher earner alone. This aims to create a fairer system for both single- and dual-income families.
Filing for the HICBC and Compliance
If your household is affected by the HICBC, you are generally required to register for self-assessment and file a tax return with HMRC to account for the charge. This can introduce an administrative burden for some families, particularly those unfamiliar with self-assessmen.
To avoid penalties, it is crucial for affected individuals to comply with HMRC’s reporting requirements. The government is also considering streamlining this process to reduce the need for families to file self-assessment tax returns in the future.
Should You Still Claim Child Benefit?
Even if your household income exceeds £60,000 and you are subject to the HICBC, there are still reasons to claim Child Benefit. One of the most important benefits is that claiming Child Benefit provides National Insurance (NI) credits, which are crucial for building entitlement to the state pension.
For lower-earning or non-earning partners, these NI credits can make a significant difference in their pension entitlements later in life. Additionally, children whose parents do not claim Child Benefit may not automatically receive a National Insurance number when they turn 16, which can lead to administrative issues down the line.
Backdating Claims and New Applications
If you have not yet claimed Child Benefit, it’s worth noting that new claims can be backdated for up to three months or to the child’s birth date, whichever is later. However, with the new rules in place from April 6, 2024, any backdated payments will be treated as falling within the 2024/2025 tax year to avoid HICBC liability for the previous tax year.
This is particularly beneficial for families who may not have claimed Child Benefit previously but now find it advantageous due to the increased HICBC threshold.
Impact on Different Types of Families
The changes in the HICBC and the overall Child Benefit system will have different implications depending on your household structure:
Single-income families: with a higher earner may still find themselves affected by the HICBC, especially if their income exceeds £80,000. However, the higher threshold from 2024 offers some relief.
Dual-income families: with both parents earning close to the £60,000 threshold may benefit significantly from the new system, as they are less likely to lose their Child Benefit.
As the system moves toward assessing household income from 2026, many families may find themselves either newly eligible for Child Benefit or facing a reduced HICBC liability.
Looking Ahead: Possible Reforms
While the 2024 changes offer some relief to families, there are ongoing discussions about how to further improve the Child Benefit system. Some experts have suggested that the HICBC could be scrapped entirely, or that Child Benefit could be recovered through means other than the tax system.
The complexity of the HICBC, particularly in relation to self-assessment requirements, has led to calls for simplification. The government is currently exploring ways to make the process more straightforward, including automating the charge based on household income without requiring tax returns.
FAQs
What is Child Benefit?
Child Benefit is a government payment provided to parents or guardians to help with the cost of raising children. In the UK, it is available for children under 16, or under 20 if they are in approved education or training. The payment is typically made every four weeks and is tax-free unless a parent earns over a certain income threshold.
Who is eligible for Child Benefit in 2024?
Eligibility for Child Benefit applies to anyone responsible for a child under 16 (or under 20 if in full-time education or approved training). You don’t need to be a UK citizen, but there may be additional rules for people coming from abroad. However, if either parent earns more than £50,000 annually, they may have to pay back some or all of the benefit through the High-Income Child Benefit Charge.
How does the High-Income Child Benefit Charge work in 2024?
If you or your partner earns more than £50,000 a year, you may be liable to pay the High-Income Child Benefit Charge (HICBC). This means you’ll need to repay 1% of the Child Benefit for every £100 you earn over £50,000. If either partner earns more than £60,000, you’ll need to repay the full amount of Child Benefit received.
Conclusion
The updates to Child Benefit in 2024 represent a significant shift, particularly with the increase in the HICBC threshold from £50,000 to £60,000. This change will provide much-needed relief for many families, though higher earners may still face challenges. With future reforms on the horizon, including a shift to household income assessment by 2026, the system is gradually becoming more equitable. Families should stay informed and consider the broader implications of claiming Child Benefit, especially with regard to National Insurance credits and long-term financial planning.
To read more, Click Here .