High-Income Families Face Costly Benefit Clawback
HM Revenue and Customs (HMRC) has issued fresh guidance urging taxpayers to contact the department if they receive letters demanding repayment under the High Income Child Benefit Charge (HICBC). The warning comes after reports of confusion among families earning over £60,000 a year.
The HICBC applies when an individual or their partner’s income exceeds the threshold, requiring gradual repayment of Child Benefit. Once earnings reach £80,000 or more, the entire amount must be returned. The policy, designed to ensure higher earners contribute more, has long been criticised for its complexity and communication issues.
How the Charge Works
Under the current system, the charge reduces Child Benefit by 1% for every £200 of income above £60,000. For families with two children, this could mean repaying around £2,250 annually if their income exceeds £80,000. The benefit currently stands at £26.05 per week for the first child and £17.25 for each additional child.
Taxpayers can make repayments through the PAYE system by adjusting their tax code or via self-assessment. However, many recipients report difficulty navigating the process, especially when trying to coordinate repayments with HMRC’s online and phone services.
Confusion Over Payment Process
One taxpayer who received the demand said they attempted to arrange repayment through PAYE but encountered an “error” in the system. HMRC later advised them to call for support, but the individual reported waiting nearly an hour without success.
HMRC responded by apologising for the delay and recommending that callers reach out during off-peak hours, between 8am and 9am on weekdays. “Our lines are open 8am to 6pm, Monday to Friday, and are usually less busy early in the day,” the department said.
When and How to Contact HMRC
HMRC has encouraged those with concerns about income tax or PAYE-related adjustments to call the helpline. The line can also provide guidance for overpayments, underpayments, or issues linked to the Child Benefit charge.
Officials emphasised that taxpayers should not ignore letters from HMRC, even if they believe the calculation is incorrect. “If you think you’ve been contacted in error or are unsure how much you owe, please get in touch as soon as possible,” an HMRC spokesperson advised.
Ongoing Criticism of the HICBC System
The High Income Child Benefit Charge has faced criticism since its introduction, with campaigners arguing that it penalises single-income households and creates unnecessary administrative burdens. Families have also expressed frustration over the lack of clarity on whether they need to register for self-assessment.
Financial experts say better communication from HMRC is crucial to prevent costly mistakes. “Many people don’t realise they fall into the charge until they’re hit with an unexpected bill,” said one tax adviser. “Early engagement with HMRC can save a lot of time and stress.”
What Families Should Do Next
HMRC’s latest warning serves as a reminder for families to review their income levels and ensure they are correctly paying or repaying Child Benefit. Tax professionals recommend keeping all correspondence and checking income details well ahead of the January tax deadline.
Families who have experienced issues with PAYE adjustments or delays in HMRC responses are urged to document all interactions. In some cases, HMRC may adjust tax codes manually or provide repayment plans to ease financial pressure.
