Thousands of parents who had opted out of receiving child benefit because they had to pay the High Income Child Benefit Charge (HICBC) could find they are eligible to claim again without a tax charge, following a loss of income due to the coronavirus emergency.
As child benefit rates rise, Royal London, the mutual insurer, is urging working parents who have previously stopped claiming child benefit because their earnings took them above the threshold for the HICBC, but have subsequently suffered a loss of income, to reclaim the benefit.
Anyone earning £60,000 or slightly more who has stopped claiming child benefit, but then loses 20 per cent or more of their income under the government’s job retention scheme, would find their income falls to £50,000 or below and they are once again eligible to claim without being liable for the HICBC.
Parents earning under £60,000 but more than £50,000 after a drop in income could also claim child benefit, but would still have to pay a proportion back through the charge in their next tax return. Those who anticipate a drop in income this tax year to below the threshold might also want to start claiming again now, in advance of their income falling, if they need help with living costs now.
For the new tax year 2020/21, the amount parents can claim will rise to £21.05 a week for a first child and £13.95 a week per child for subsequent children – a rise of £32 a year to £1,820, up from £1,788 a year in the previous tax year, for a family with two children under 16.
The High Income Child Benefit Charge (HICBC) has dissuaded thousands of parents from bothering to claim child benefit since it was introduced.
According to official statistics published two weeks’ ago, another 44,000 parents stopped claiming child benefit altogether in the last year, a downward trend attributed to more parents being dragged above the threshold.
The IFS estimated that one million families have lost their full entitlement to child benefit and 1.4 million in total have been affected by the charge since it was introduced in 2013.
About the High Income Child Benefit Charge
In households with children under 16 in receipt of child benefit, where one person earns more than £60,000, the charge - equal to the whole benefit received - must be paid in full, effectively cancelling out any benefit from claiming and introducing the need to file self-assessment tax returns to earners who are otherwise PAYE.
If one person earns between £50,000 and £60,000, a proportion of any child benefit received must be paid back via a self-assessment tax return – so many earners within this income band have also decided that the HICBC means it is not worth bothering claiming child benefit for their family. For every £100 earned above £50,000, 1 per cent of the child benefit received is effectively withdrawn through the charge.
However, it is a valuable extra source of help for families struggling on lower incomes during the current emergency.
Becky O’Connor, personal finance specialist at Royal London, said: “Thousands of parents who had written off child benefit because of the High Income Child Benefit Charge may find they can claim it again without having to pay the charge, as a result of falls in income."
“Child benefit is a valuable source of extra help in these difficult times and we are urging parents who had abandoned it but have recently suffered a drop in income to sign up again to receive it.”
Notes to Editors
- *IFS: Stealthy changes mean that soon one in five families will lose out https://www.ifs.org.uk/publications/13791
- Parents can find out more and claim here https://www.gov.uk/child-benefit/what-youll-get
About Royal London
Royal London is the largest mutual life, pensions and investment company in the UK, with funds under management of £130 billion, 8.8 million policies in force and 4,046 employees. Figures quoted are as at June 2019.
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