Coronavirus: High Income Child Benefit Charge (HICBC): What to do if your income falls

Updated on 3 April 2020

The coronavirus (COVID-19) pandemic is causing many people to see a reduction in their income. This can mean there are knock-on effects to your tax position.

If your income falls, your liability to the HICBC may change or be eliminated completely. Where this is the case, if you do not currently claim child benefit, you may wish to consider claiming it. If you have opted out of receiving payment, you may wish to restart payments. In this article, we explain what to consider.

bag of income with downwards arrow
(c) Shutterstock / Andrii Yalanskyi

⚠️ We are working hard to ensure this guidance is up to date – however you should bear in mind that things may change on a daily basis as the Government respond to the ongoing situation.

What is the HICBC? 

The HICBC applies where:

  • either you or your partner has adjusted net income of over £50,000; and
  • either you or your partner claims child benefit.

For the HICBC, it does not matter which partner claims child benefit. However, the HICBC is always paid by the partner with the higher adjusted net income.

Note that ‘adjusted net income’ is not simply your total taxable income. It is possible to deduct things like Gift Aid contributions and certain pension contributions from your taxable income in order to arrive at adjusted net income. Refer to the guidance on GOV.UK.

The HICBC is an additional tax which is paid by the partner with the higher adjusted net income. The amount of the extra tax is equal to 1% of the child benefit received by them (or their partner) for each £100 above £50,000 threshold. Once the adjusted net income of the higher partner reaches £60,000, 100% of the child benefit is effectively clawed back via the charge.

We publish more information on the HICBC here.

What if we have a fall in income?

Households may find themselves in a position where they face a fall in income as a result of the coronavirus pandemic (or for any other reason). This may affect liability to the HICBC.

⚠️ Warning: liability to HICBC is assessed according to adjusted net income for the tax year, even though child benefit is a weekly benefit.


Example:

James earns £6,000 gross a month from employment and makes pension contributions of £500 a month. His adjusted net income would normally be £66,000 a year. He has a 5-year-old son with his partner, Sam. Sam earns £20,000 a year. They decided not to bother claiming child benefit because they thought they would just have to pay it all back via the HICBC. However, James loses his job on 1 February and they decide to claim child benefit, backdated for three months. James has no other income for the year.

James’s adjusted net income for the year is £55,000 (10 months at £5,500 a month). Even though the child benefit was claimed after James lost his job, he must still pay a HICBC equal to 50% of the child benefit received for the year.


Looking first at an individual’s adjusted net income for 2019/20, there are a number of different possibilities.

Note that the table below assumes that there is no change in the partnership throughout the year or any change in which partner has the higher adjusted net income. If there is a change in the partner with the higher adjusted net income, please see below.

Expected annual adjusted net income of the partner with higher adjusted net income  Adjusted net income of this partner (if still higher than the other partner)  HICBC effect
Above £60,000 Above £60,000 No effect on liability to HICBC. The HICBC remains at 100% of the child benefit received.
Above £60,000 To between £50,000 and £60,000

The HICBC becomes less than 100% of the child benefit claimed.

If such a household is not claiming child benefit, they may wish to start claiming it.

Alternatively, if they have opted out of receiving payments, they may wish to restart them.

If such a household is receiving child benefit payments, the partner with the higher adjusted income will need to file a Self Assessment tax return as normal.

If that partner is paying the full HICBC in-year via PAYE based on income in excess of £60,000, then filing the Self Assessment may result in a tax refund. The sooner the return is submitted, the sooner the refund is paid.

Above £60,000 To below £50,000

In this case, the HICBC is eliminated completely.

If such a household is not claiming child benefit, they may wish to start claiming it.

Alternatively, if they have opted out of receiving payments, they may wish to restart them.

If the partner with the higher adjusted net income is paying the full HICBC in-year via PAYE based on income in excess of £60,000, then filing the Self Assessment may result in a tax refund. The sooner the return is submitted, the sooner the refund is paid.

It may no longer be necessary to file a Self Assessment tax return. Check GOV.UK. If you are sent a notice to file a tax return, consider asking HMRC to withdraw it if you no longer meet the criteria.
Between £50,000 and £60,000 Less, but still between £50,000 and £60,000

The partner with the higher adjusted net income in this situation would typically be paying the HICBC via their Self Assessment tax return.

If an estimated charge is being collected via PAYE, then you may be able to ask HMRC to update the amount included in your tax code in time for final salary payment for the 2019/20 tax year. Otherwise, a refund may be due upon submission of the Self Assessment tax return.

Between £50,000 and £60,000 To below £50,000

In this case the partner with the higher adjusted net income will no longer be liable to the HICBC.

If the charge is being collected via PAYE, then you may be able to ask HMRC to update your tax code in time for your final salary payment in 2019/20. Otherwise, a refund may be due upon submission of the Self Assessment tax return.

It may no longer be necessary to file a Self Assessment tax return. Check GOV.UK. If you are sent a notice to file a tax return, consider asking HMRC to withdraw it if you no longer meet the criteria.

 

What about 2020/21?

Looking forward to 2020/21, if you think your liability to HICBC will change because of a fall in income, similarly you should consider whether:

  • if you are not currently receiving child benefit, you may wish to claim child benefit or restart payments,
  • if the HICBC is being collected via PAYE, you should ensure any amount included in your tax code is an accurate reflection of your expected liability for the year
  • if your (or your partner’s) income is expected to fall to below £50,000 for the year, consider whether you (or your partner) still meets the criteria to file a Self Assessment tax return. If not, consider asking HMRC to withdraw any notice to file they issue so you no longer need to file a return.

What if my partner's income falls and my income is now higher?

Remember that you should be comparing the adjusted net income over the whole year.

If your adjusted net income for the year is more than £50,000 and higher than your partner’s, you will liable to pay any HICBC due in respect of child benefit received in the year.

If you don’t already file a Self Assessment tax return, you will need to register in order to complete one and calculate your liability to the charge.

Your partner should consider whether or not he or she still meets the criteria to file a Self Assessment tax return for the year in which you are liable to the HICBC. If a notice to file a return has been issued, it may be possible to get it withdrawn.

How can I claim child benefit?

Refer to the guidance on GOV.UK. Note that the claim can be backdated for up to 3 months.

How can I restart receiving payments of child benefit having opted out?

Refer to the guidance on GOV.UK.

You can also request to reinstate payments for the two previous tax years, if applicable, by contacting the child benefit office via telephone. You should make a note of the date and time of the call and the information provided. Alternatively, you can contact them by using this online form, but you should be aware that you are not provided with confirmation of the submission, so we suggest you take and save a screenshot or photograph of the screen before pressing submit (or again take a note of the information provided and the date and time of submission).  

Where can I find more information?

You can find more information on the HICBC on GOV.UK.

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