Some 180,000 parents could be up to £1,660 better off after recently introduced changes to Child Benefit tax rules.
Parents are being urged to claim the benefit after the Government’s overhaul of the High Income Child Benefit Charge (HICBC).
The Institute of Chartered Accountants in England and Wales (ICAEW) is reminding households that the benefit is now worth claiming for some higher earners.
Thanks to the latest changes, which came into effect from April 6, Child Benefit is now worth claiming for families where the highest earner is paid up to £80,000 annually.
Previously, the tax charge was implemented when Child Benefit was claimed and the highest earner in the household earned more than £50,000 a year, and was lost entirely if a worker earned £60,000 or more per year.
However, this lower threshold was raised to £60,000 in March under changes introduced by Chancellor Jeremy Hunt.
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Thousands of families are being urged to claim child benefit following recently announced tax changes
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Now, families where the highest earner’s income is between £60,000 and £80,000 annually can keep some of their Child Benefit.
This is because these households will now pay less of the High Income Child Benefit Charge. People who need to pay the tax must fill out a Self Assessment Tax Return.
Under the previous tax rules, many parents with a high earner in their household opted against claiming Child Benefit to avoid having to pay the charge.
This levy meant HMRC clawed back the benefit at a rate of one per cent for every £100 of income between £50,000 and £60,000.
For individuals who earned £60,000 or above, all of the Child Benefit had to be repaid under the tax charge.
Hypothetically, a parent with two children could get £2,075 in Child Benefit in 2023/24 and would be eligible to receive £2,213 in the 2024/25 tax year.
However, if the highest earner in this family had an income of £65,000 last year, they would have to repay the entirety of the Child Benefit received under the charge.
With the new thresholds in place, the HICBC for somebody earning £65,000 would be only £553.
As such, a household with an earner making this amount would keep £1,660 or 75 per cent of Child Benefit.
Caroline Miskin, the ICAEW’s senior technical manager for digital taxation, emphasised why Child Benefit is likely worth applying for following these changes.
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Child Benefit can be claimed from the day after a child's birth has been registered GETTYShe explained: “This is a good opportunity for parents who had previously decided that they’d rather forego child benefit than deal with the high income charge to reconsider their decision, as increased income thresholds announced at the Budget mean that they can keep more of the money.
“The Government estimates that 180,000 parents who currently don’t claim Child Benefit stand to gain, so the onus is on parents to take action to avoid missing out.
“We recommend that claims are made using HMRC’s app, which is the most efficient way to claim and usually means faster payment.”
This latest change to Child Benefit rules comes amid a flood of tax changes introduced by the Government, including the recent cut to National Insurance.