Families receiving Child Benefit who also exceed certain income levels are set to benefit from a new administrative change implemented by HM Revenue & Customs (HMRC).
The department has begun rolling out a streamlined system allowing higher earners, who are liable for the High Income Child Benefit Charge (HICBC), to pay the charge through Pay As You Earn (PAYE).
This removes the previous requirement for many affected households to complete an annual self-assessment tax return, reducing an administrative burden and affecting over 100,000 families according to recent figures. The change comes as the government seeks to improve the efficiency and accessibility of its tax processes.
Overview of the High Income Child Benefit Charge
The High Income Child Benefit Charge applies to individuals whose annual income exceeds a defined threshold, while they or their partner receive Child Benefit payments.
The purpose of the charge is to ensure that families with higher earnings repay some or all of the benefit received, balancing support with fiscal responsibility. Previously, the charge required those affected to register for self-assessment and make an annual payment to HMRC.
This process impacted not only the primary claimant but also partners whose income crossed the applicable threshold. The arrangement has often been criticised for its complexity.
Key Changes to the Payment System
With the latest update, HMRC is enabling the HICBC to be collected directly through PAYE, the system most UK employees use for regular income tax collection. From September 2025, eligible taxpayers will have the charge reflected in their tax code, automatically adjusting the amount deducted from their salary or pension.
The change intends to reduce the necessity of filing a separate self-assessment return solely because of the HICBC, aligning the collection process with standard tax practice for many earners.
It addresses longstanding calls for a less cumbersome method of payment for those already paying tax through the PAYE system.
Eligibility Criteria and Income Thresholds
The HICBC is charged when either an individual or their partner has an income over the government's established limit and receives Child Benefit. For the tax years starting from April 2024, the threshold is set at £60,000 a year.
For previous years, including up to 2023–2024, the limit remained at £50,000. Importantly, the charge can apply even if the child in question is not the taxpayer's own, provided Child Benefit is being claimed and the individual contributes to the child's upkeep.
The amount owed increases gradually as income rises above the threshold, with the full amount repayable once income reaches £80,000.
Historical Context and Old Procedures
Prior to the recent changes, tens of thousands of families were drawn into the self-assessment system due to the HICBC, despite most of their taxes being handled automatically via PAYE. This led to widespread frustration among higher earners, particularly those unfamiliar with annual tax returns.
The process imposed an added layer of complexity for affected households, many of whom only entered self-assessment for this reason. This longstanding issue prompted financial experts and professional bodies to advocate for reform in the tax collection method.
Data on Affected Households
According to information disclosed under the Freedom of Information Act to Quilter, a financial advice provider, approximately 102,000 taxpayers were liable for the HICBC and would have qualified for automatic collection by PAYE in the 2021–22 financial year.
By the following year, this number had risen to 126,000, reflecting more households entering the higher income bracket due to salary increases or changes in eligibility.
These figures suggest that the new system could spare at least 100,000 households from completing a yearly self-assessment solely due to the HICBC, streamlining compliance for a significant portion of claimants.
Final Summary
HMRC’s decision to permit payment of the High Income Child Benefit Charge via PAYE represents a significant administrative shift for higher-income families receiving Child Benefit.
By allowing the charge to be managed within the standard payroll system, the change is expected to benefit over 100,000 households, reducing the time and complexity previously involved. The move has been positively received by experts, who believe it reflects modern tax system expectations and reduces the likelihood of mistakes.
As tax processes become more streamlined, families can monitor their tax position with greater convenience an area made easier through digital solutions like the Pie platform.
