Sunak charges 65% income tax in new shock – ‘unfair levy must be axed NOW’ | Personal Finance | Finance

Now tax experts are demanding this sneaky levy is axed, yet so far there has been no response from the Treasury. The UK’s complex tax system is riddled with unfairness and one of the cruellest quirks sees some families paying an effective 65 percent tax rate on their income.

Once one parent makes £60,000 or more, they have to repay all of the child benefit.

This is known as the higher income child benefit tax charge (HICB), a stealth tax introduced by former Chancellor George Osborne in 2013.

This affects hundreds of thousands of parents who are receiving child benefit, and may already be struggling due to the cost of living crisis.

Child benefit is paid to parents who are responsible for bringing up a child who is either under 16, or under 20 if in approved education or training.

It is worth £21.80 a week for the first child, and £14.45 a week for any subsequent children.

Although it is not means tested, if one earner in a family makes more than £50,000 a year, they must pay back one percent of the child benefit they receive for every £100 of income over that threshold.

The HICB already affects around 630,000 families a year, who handed £416 million to HMRC in the 2019/20 tax year, that’s £660 each on average.

Yet it is unfair in a number of ways. First, that £50,000 threshold has not increased in nine years, while the average weekly wage has climbed 29 per cent, dragging more parents into the net every year.

The levy also comes down hard on families with only one breadwinner. They will incur the HICB the moment their income passes £50,000, yet a couple who both earned, say, £40,000 each, would escape despite earning £80,000 in total.

The HICB is also complicated. Someone earning above £50,000 but below £60,000 will claim their child benefit in the usual way, then complete a self-assessment tax return to hand back a chunk of the money to HM Revenue & Customs.

READ MORE: Child Benefit: Parents left confused after getting small early payment

The HICB would cost them £1,054 in lost child benefit, with 20 percent income tax on the first £270 they earn above £50,000 adding £54, while 40 percent tax on the remaining income adds another £1,492.

In total, they will lose £2,600 of their £4,000 earnings, almost two thirds.

Browne said workers could potentially avoid the HICB charge by making extra pension contributions, which reduces their taxable salary. “They will both increase the amount of child benefit they receive and earn tax relief on their pension contributions.”

Jenny Holt, managing director, customer savings & investments at Standard Life, suggests using the government’s child benefit tax calculator to work out if you are affected.

Holt said if you choose not to take child benefit payments, you should still consider filling in the child benefit claim form. “This helps you get National Insurance credits, which go towards your State Pension later in life.”