Overview
HMRC forecasts an increase of 35,000 more families will be liable for the High Income Child Benefit Charge (HICBC) in the next 3 years according to a recent freedom of information request.
The increase comes as a result of frozen tax thresholds and rising household incomes and it is important to know if you, or your family could be affected.
What is HICBC?
The HICBC is a charge that you or your partner may have to pay if one of you has income over the threshold and you claim child benefit. The threshold to start paying HICBC in 2024/25 is £60,000 (in prior years it was £50,000).
Once one of you hits the annual threshold, the higher earner will need to start repaying the benefit back to HMRC. It is always the higher earner that pays the charge regardless of whose name is on the benefit claim or which bank account the benefit is paid into. Most people will pay the HICBC via their self assessment tax returns, however it is possible to pay via your PAYE tax code if certain conditions are met.
It is also worth noting that you can opt out of receiving child benefit payments at any point. Therefore, if you or your partner are expecting an increase in earnings it would be worthwhile considering whether to continue to claim the benefit or opt out to avoid the charge.
How much do you have to pay?
If you earn over £60,000 in tax years 2024/25 onwards, you will need to pay back 1% of your child benefit receipts for every £200 over the threshold that you earn.
For example:
2024/25
If you claim child benefit for one child, that would be £25.60 per week or £1,331 per year.
If you had annual income of £65,000, i.e. £5,000 more than the £60,000 threshold, that is 25 x £200 over the threshold. You would therefore need to repay 25% of the child benefit claimed (being £332.80) as HICBC.
If you earned £80,000 or more, you would need to repay 100% of your child benefits received in the year.
2023/24
In 2023/24 and prior the threshold was £50,000 per year and the taper was 1% for every £100 over the threshold that you earned.
If you claimed child benefit for one child, that would be £24 per week or £1,248 per year.
If you had annual income of £55,000, i.e. £5,000 more than the £50,000 threshold, that would be 50 x £100 over the threshold. You would therefore need to repay 50% of the child benefit claimed (being £624) as HICBC.
What if you separate from your partner during the year?
HICBC generally applies to both married couples and couples that are living together as if married, but it can also apply in less conventional circumstances.
Whilst HICBC thresholds apply to the entire year, you can apportion the charge if you separate partway through a tax year. For example, if you separated in September 2024, you would only need to repay the child benefit received between 6 April 2024 to the week of separation. This would need to be paid back to HMRC by 31 January 2026 and so given the passage of time between separation and the HICBC deadline, may come as an unexpected surprise.
The definition of separation can be complicated especially if you were not married as there is no legal test to determine it. In practice, the date of permanent separation would usually be the date that the couple agreed that they would not be getting back together. There may be some evidence to back that up such as the separation of finances, telling friends and family and changes to the living arrangements.
Another complexity arises when separated partners no longer live together, but the higher earner continues to financially support the parent living with the child. Even where financial contributions exceed the child benefit entitlement the higher earner will still be liable for the charge. This can feel particularly unfair, as the couple are no longer together, do not share a household, and the higher earner is already contributing to their child’s home and upbringing.
I think we meet the criteria, what should I do?
If you have just reached the threshold for HICBC, you should register for self assessment for the tax year in which you breach the threshold. For example, if you started earning more than £60,000 in 2025/26, you should register for self assessment for 2025/26 by 5 October 2026. You will need to file your return and pay any tax due by the 31 January following the end of the relevant tax year. If you do not need to file for any other reason, you may also consider opting out of the benefit. Where you or your partner’s income exceeds £80,000 and either of you is in receipt of child benefits, you should consider whether to opt out to avoid having to register for self assessment.
If you are concerned that you may have been meeting the conditions for some time and did not realise, then you may need to make a voluntary disclosure to bring your tax affairs up to date. HMRC have a Digital Disclosure Service that allows you to do this. This is likely going to apply in cases where you are not registered for self-assessment or have received child benefits and filed tax returns in years no longer capable of being amended, being the one-year anniversary of 31 January following the end of the tax year.
We have seen an increase in the number of HMRC nudge letters asking taxpayers to check if they need to pay HICBC. It is important that any nudge letter is taken seriously by taxpayers and it is recommended they respond to HMRC within the timeframe included in the letter, ideally having sought professional advice before doing so.
How can we help?
At Menzies, we have helped many clients correct their HICBC errors, whether they are current or historic matters. We understand that families are complex and a one-size-fits-all approach cannot be taken, especially in cases where there has been a separation.
If you would like to discuss HICBC or voluntary disclosures of any kind, please contact Menzies’ Tax Disputes and Disclosures team on our free and confidential hotline below, or alternatively, contact us via the contact form.
Call our free confidential hotline – 020 7465 1900
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