Thousands of households receiving Child Benefit can now settle the high income tax charge using their tax code for the first time. Child Benefit amounts to £26.05 weekly for the first child and £17.25 for each additional child. If an individual or their partner earns over £60,000, a portion of the Child Benefit must be repaid based on a 1% repayment rate for every £200 earned beyond £60,000, referred to as the High Income Child Benefit Charge.
Once earnings exceed £80,000, the full Child Benefit amount must be repaid. While the usual method for repaying the high income charge is through self-assessment, there is now the option to settle it through the PAYE tax code. This change involves HMRC adjusting the tax code, with the charge deducted from the individual’s pay. This option is available to employed individuals who do not need to file a self-assessment return for other reasons.
To opt in for the 2024/25 tax year, which concluded on April 5, 2025, individuals have until January 31, 2026. Those who typically need to file a self-assessment cannot utilize the new PAYE option. High-income households have the choice to claim Child Benefit without receiving payments, ensuring National Insurance credits for the state pension without incurring the charge.
Child Benefit is accessible to over seven million families with children under 16 or under 20 in approved education or training. While various educational programs qualify, university and BTEC qualifications are excluded. Claimants must either live with the child or contribute an equivalent amount for their care to receive payments.
Dan Tomlinson, Exchequer Secretary, expressed that HMRC’s modernization aims to simplify tax processes. Parents can now avoid the hassle of filing a tax return with the straightforward system for paying the High Income Child Benefit Charge. Upon opting in, individuals receive a new tax code reflecting the HICBC deduction, with income fluctuations and entitlement adjustments reflected in-year within the tax code.