Monday 6 December 2021
High Income Child Benefit Charge
The petition of residents of the constituency of Linlithgow and East Falkirk,
Declares the High Income Child Benefit Charge is an unfair policy that puts families with one high-income earner at a financial disadvantage to a two-earner family; further that it discourages claims to child benefit, which negatively impacts National Insurance Contributions; notes that that the policy’s £50,000 threshold does not align with the basic-rate tax threshold of £50,270.
The petitioners therefore request that the House of Commons urges the Government to re-examine the High Income Child Benefit Charge policy to address the disparities it creates and ensure that any revision accounts for future increases in basic-rate tax thresholds.
And the petitioners remain, etc.—[Presented by Martyn Day, Official Report, 25 October 2021; Vol. 702, c. 112.]
Observations from The Financial Secretary to the Treasury (Lucy Frazer):
The Government thank the hon. Member for Linlithgow and East Falkirk (Martyn Day) for submitting the petition on behalf of his constituents regarding the High Income Child Benefit Charge (HICBC) P002692. The Government are sorry to hear of his constituents’ view that the HICBC is an unfair policy.
The Government are committed to managing the public finances in a disciplined and responsible way by targeting support where it is most needed. Restricting child benefit for those on higher incomes ensures that everyone makes a fair contribution while those with the lowest incomes continue to be supported. Families can choose to opt out of receiving child benefit payments, which means they do not have to pay the HICBC, but still receive national insurance credits which count towards their state pension.
The HICBC applies to individuals with an income of over £50,000 who are in receipt of child benefit, or whose partner is. It is possible that two people in a couple can have an adjusted net income of up to £50,000 each and not be liable for the HICBC. This is because the HICBC is calculated on an individual rather than a household basis, in line with other income tax policy. Basing the HICBC on household incomes would mean having to assess the adjusted net income of everyone in each of the 7.8 million households eligible for child benefit. This would effectively introduce a new means test, creating significant administrative costs and placing a disproportionate burden on the majority of families who receive child benefit.
Theadjusted net income threshold of £50,000 only affects a minority of individuals, with comparatively high incomes. The Government therefore believe that the current threshold for HICBC remains the best option at present. As with all elements of tax policy, the Government keep this under review.