LITRG calls for rise in HICBC threshold

The Low Incomes Tax Reform Group (LITRG) has called for the high income child benefit charge (HICBC) threshold to rise in order to avoid it “hitting basic-rate taxpayers for the first time in April”. 

According to LITRG, the spending review in November 2020 confirmed that the government would increase the higher-rate threshold in line with the September 2020 CPI figure. Meaning the higher-rate threshold for 2021/22 will now be set at £50,270 – exceeding the £50,000 threshold at which the charge begins to apply. 

LITRG has said basic-rate taxpayers will now be “liable to the charge for the first time from 6 April 2021. This means the policy will no longer meet its original intent to only target higher-rate taxpayers”.

Tom Henderson, technical officer for LITRG said: “When the high income child benefit charge was announced in 2010, the Government’s policy intent was that it would only affect higher-rate taxpayers from January 2013. For the 2012/13 tax year, the higher-rate threshold – the point at which an individual is liable to the higher rate of tax – was £42,475.

“Since then, the higher-rate threshold has risen broadly in line with inflation but the £50,000 threshold for the high income child benefit charge has remained static. The Government has so far resisted  calls to up-rate the £50,000 threshold, but this is no longer tenable now the higher-rate threshold will overtake it from 6 April 2021.”

He added:” LITRG also calls for the point at which child benefit is fully clawed back to increase from £60,000 to £75,000. This is to address the fact that larger families can face higher effective marginal tax rates when they are liable to the charge. “