The charge which has retained the same £50,000 income threshold when it was introduced in 2013 is encouraging people to opt out or forcing them into the Self Assessment tax return system. This is not only bad for the families concerned, but also puts more pressure on HM Revenue & Customs (HMRC) and now catches over one million taxpayers directly.
The HICBC tax charge which ‘higher earners’ are liable to pay if they or their spouse/partner receive child benefit, has long been controversial and subject to criticism – both from an overall justice and fairness perspective and because of the additional administrative obligations that the system can create.
It has resulted in approximately one million taxpayers no longer being eligible for child benefit. This is either because they have deliberately opted out of receiving child benefit to avoid the subsequent tax charge, or are now required to have the higher earning spouse/partner complete a tax return and pay additional taxes to counteract the fact that their partner had the benefit.
The HICBC charge impacts many couples on relatively modest incomes and not just the wealthiest families in society. Because it has retained the same £50,000 income threshold, the numbers impacted by the charge have more than doubled between 2013 and 2020 when the last numbers were available.
The Government’s apparent wish to retain the system as it presently is, or their unwillingness to modify and update the system, means that the HICBC charge will in due course impact increasing numbers of families on relatively lower income levels.
This will result in even more families being drawn into the Self Assessment tax return system and being obliged to file an annual tax return each year. This is particularly true, where the income of the higher earner could fluctuate between £50k – £60k during a tax year. It is not realistically appropriate for families in this situation to fully ‘opt out’ of receiving child benefit.
Such a development will simply increase the pressure on HMRC – an organization which is already struggling to cope with increasing demands and significant staffing shortages. This in turn will result in ever poorer performance and provide HMRC with less chance to focus on other areas for example, tax evasion, which should be a core priority.
A Government which is serious about justice in society and ‘levelling up’ would realise that it needs to remove the HICBC and look at a fairer way of ensuring that all taxpayers are treated in an equitable manner whilst ensuring HMRC’s resources are utilised in the most effective and efficient manner possible.
Would you like to know more?
If you would like to discuss the above or how it may affect you and your business, please get in touch with Robert Salter or your usual Blick Rothenberg contact using the details on this page.
For press enquiries, please contact David Barzilay.