All change for High Income Child Benefit Charge

HMRC has reformed the process for repaying the High Income Child Benefit Charge (HICBC), introducing a new, simplified system.

This change allows many families to manage their repayments directly through their Pay As You Earn (PAYE) tax code, potentially eliminating the need to file an annual Self-Assessment tax return.

For employed parents who are subject to the HICBC, this new PAYE-based repayment method is intended to be more straightforward than the traditional Self-Assessment route. While this new option is available, individuals can still elect to pay the HICBC via Self-Assessment if they prefer.

If you are already required to submit a Self-Assessment tax return for other income sources, such as self-employment, the HICBC must still be included on that return.

The High Income Child Benefit Charge is a tax applied to families where one parent has an income of £60,000 or more from April 2024 (the lower limit was £50,000 up until this date). Repayment of the Child Benefit starts at this threshold, with 1% of the benefit being clawed back for every £200 earned over £60,000. If an individual's income exceeds £80,000, the full amount of Child Benefit is repaid.

Despite the charge, it is still highly recommended to claim Child Benefit, even for those who do not benefit financially. This is because registering for it provides crucial benefits, including National Insurance credits for the claiming parent and an automatic National Insurance number for the child at age 16.

Where before, the HICBC was repaid between earnings of £50,000 and £60,000, the increase in limits means the repayment bracket is between £60,000 and £80,000. This uplift will take some claiming parent households out of the recharge, who won’t therefore be needing to pay back any tax.

To utilise the new PAYE system for HICBC payments, you must register with HMRC’s online service. If you have previously chosen to stop receiving Child Benefit payments, say your income was £61,000, you can re-apply and restart them online or using the HMRC app if you feel this is beneficial.

For more information on Child Benefit or any other tax-related inquiries, please contact the tax specialists at Optimum.