Should high-income employees opt back in for child benefit?

HM Revenue & Customs (HMRC) recently issued a reminder regarding the High Income Child Benefit Charge (HICBC), and this could be the perfect time for you to ensure your employees are aware of their options, especially if they opted out of Child Benefit previously.

What is the High Income Child Benefit Charge (HICBC)?

The HICBC applies to individuals or their partners who receive Child Benefit and have an individual income over £60,000.

The charge tapers from £60,000 to £80,000, meaning for every £200 of income over £60,000, one per cent of the Child Benefit amount must be repaid through the tax system.

If an employee’s income exceeds £80,000, the charge will equal the total amount of Child Benefit received.

Why employees may want to opt back in

Starting on 6 April 2024, the income threshold for HICBC was increased to £60,000, with a taper up to £80,000.

This change could impact many employees, particularly those who previously opted out of receiving Child Benefit due to their income levels.

If your employees or their partners earn between £60,000 and £80,000, it may now be in their financial interest to restart Child Benefit payments.

The taper allows for a gradual reduction in the charge as income rises, meaning the tax cost is not as steep as before for those in this income band.

Employees may want to reconsider their decision and restart their Child Benefit payments, especially if they stand to gain more from the benefit than they would owe in tax.

What employers can do

As an employer, you play a key role in helping your employees with these changes.

Many may not be aware of the revised income threshold or the fact that they could now benefit from Child Benefit despite the HICBC.

Make sure your employees understand the recent changes to the HICBC and encourage them to review their individual circumstances. They can use HMRC’s Child Benefit tax calculator to estimate their adjusted net income and see how much they could owe in tax, if anything.

Some employees may want to restart Child Benefit payments, while others may decide to opt-out. Either way, having the right information will allow them to make an informed choice.

If your employees are unsure about how to calculate their adjusted net income or how the Child Benefit tax charge works, your payroll team can help ensure that the right deductions are made, and employees are correctly registered for Self Assessment if needed.

If you are unsure of how to approach this or need assistance getting your employees back on Child Benefit payments, our firm is here to help.

We can guide you through the process and ensure your employees have the support they need to make the best decisions for their financial situations.

Get in touch with our team today, and let’s ensure your employees are taking full advantage of the benefits available to them.