HM Revenue and Customs has issued a stark warning to British parents earning £60,000 or more, urging them to verify whether they must repay Child Benefit or risk an unexpected tax bill. The alert focuses on the High Income Child Benefit Charge, which applies when at least one person in a household exceeds the income threshold.
Understanding the High Income Child Benefit Charge
HMRC has reminded taxpayers that the charge is triggered if you or your partner claim Child Benefit and either of you has an adjusted net income exceeding £60,000. The limit was raised from £50,000 to £60,000 starting from the 2024–25 tax year onwards.
Once earnings surpass £60,000, a portion of the benefit must be returned. At £80,000 or beyond, the entire amount is recovered. The repayment operates on a graduated basis, requiring families to repay 1% of their Child Benefit for every £200 earned above £60,000.
How the Repayment System Works
For instance, someone with earnings of £67,600 would repay 38% of their benefit. HMRC explains that the calculation is based on adjusted net income, which encompasses salary, savings interest, and dividends. This figure is calculated before personal allowances but after certain deductions such as pension contributions and Gift Aid.
New Digital Payment Options
HMRC is promoting a new digital platform that allows families to settle the charge through their wages if they are not already registered for Self Assessment. In a post on X, HMRC stated: "Earning over £60k? Check if you need to pay the High Income Child Benefit Charge."
The procedure is described as "quick and easy with the HMRC app or online." There are two primary methods to pay the charge: via Self Assessment or through PAYE, deducted automatically from your wage. The PAYE option is now being promoted more actively, enabling employees who do not typically submit tax returns to avoid registering for Self Assessment.
Important Deadlines and Regulations
PAYE can only be utilised if it is before 31 January following the relevant tax year. If you already submit a tax return for other reasons, you must still use Self Assessment. If both partners earn above the threshold, the higher earner pays the charge.
Options for Families
Families can opt to stop receiving Child Benefit payments entirely to avoid the charge. However, even if payments are halted, it remains worthwhile registering because it protects National Insurance credits towards the State Pension and ensures automatic allocation of a National Insurance number for the child at age 16.
Why This Alert Is Significant
The warning arrives as numerous households move into the higher income bracket due to salary increases, potentially triggering the charge without awareness. HMRC is encouraging parents to review their situation and use its online resources to avoid being caught out.
This proactive approach aims to prevent surprise bills and ensure compliance with tax regulations, highlighting the importance of staying informed about changes in income thresholds and payment methods.
