The Treasury’s 2010 spending review made it clear that the charge would apply to higher rate taxpayers. However this is no longer the case. While the higher rate threshold has increased from £42,475 to £50,270 during that time, the threshold to begin paying back the HICBC has stayed the same. This clearly contradicts the Government’s intention to withdraw the benefit only from high income families.
The Low Incomes Tax Reform Group (LITRG) is now calling on the Government to address the erosion of its policy link in the upcoming budget, by increasing the threshold at which the HICBC applies. They are also calling for the point at which child benefit is fully clawed back to increase from £60,000 to £75,000. This is to address the high effective marginal tax rates, which can be as much as 60 per cent when parents are liable to the charge. These figures will of course increase further with the planned 1.25 per cent rise in National Insurance contributions from 6 April 2022.
We are calling on the Government to urgently review the impact of the HICBC on basic rate taxpayers and ensure that their own policy works as it was originally intended.