If you are a parent, you may have heard about the High Income Child Benefit Charge (HICBC). This policy, introduced in 2013, has been the subject of much controversy and debate ...
If this is the case, the higher earner is required to repay some or all of the child benefit received by the family. For those earning over £60,000 the child benefit is clawed back in full. For those earning over £50,000, but less than £60,000, the charge is gradually reduced.
The aim of HICBC was to reduce the amount of child benefit paid to higher earners, in order to save the government money. However, the implementation of this policy has caused much confusion and frustration among families.
Firstly, many families were not aware of the charge until they received a tax bill for the previous tax year. This has left many feeling blindsided and struggling to pay a large lump sum of money. Additionally, the charge is based on the higher earner's income, rather than the combined household income.
This means that a family with two working parents earning just below the threshold wouldn’t be subject to the charge, while a family with one high-earner and one stay-at-home parent would be subject to the charge even if the household income is lower.
Families with multiple children are hit the hardest, as the rate of clawback is the same regardless of the number of children in the household. This means that a family with three children will pay the same charge as a family with one child, even though their combined income may be the same.
The impact of HICBC on families has been significant. Many have had to make difficult financial decisions, such as cutting back on essential expenses or taking on additional work to cover the cost of the charge. This has put a strain on family finances and has caused a great deal of stress and hardship for many.
This has been supported by various organisations, including the Institute for Fiscal Studies, which has stated that the policy is 'complex and poorly understood'. In fact, a recent survey found that 84% of the public believes the charge should be scrapped altogether.
So, what is the government doing about this pressure to scrap HICBC? In 2019, the Chancellor of the Exchequer, Sajid Javid, hinted that the policy could be reviewed in the upcoming budget. However, the COVID-19 pandemic shifted the government's focus and it is uncertain whether HICBC will be addressed in Jeremy Hunt's next budget in the spring.
In the meantime, families are left to navigate the complexities of HICBC and the financial burden it places on them. Many are calling for a fairer and more transparent system, such as basing the charge on household income rather than individual income. Others argue that child benefit should be means-tested, rather than subjecting all families to the same charge regardless of their financial situation.
The pressure on the government to scrap this charge is mounting, and it is clear that a fairer and more transparent system is needed. As a parent, staying informed about this policy and advocating for change that will benefit all families, regardless of their income is important.
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