The High Income Child Benefit Charge (HICBC) has been part of the UK tax system since January 2013, introduced by HMRC to claw back Child Benefit from households where at least one individual has a higher income. While Child Benefit is paid regardless of household income, HICBC operates through the tax system to partially or fully recover it from higher earners. Completing a tax return then becomes necessary if you received HICBC and had to repay some of it.
This caused numerous issues in the past because many parents didn’t fully understand that if their net adjusted earnings exceeded £50,000, they were required to repay a portion of the benefit. The only way to repay it in those days was to complete a self-assessment tax return.
When preparing clients’ tax returns, we always ask this important question. However, if you have never filed a tax return and believe your income is fully taxed by your employer, you may wonder why you need to register for self-assessment.
There was confusion, and many taxpayers received large tax demands in later years for failing to submit their self-assessment returns and repay the child benefit on time. You can imagine the upset and dismay this may cause.
HM Revenue & Customs (HMRC) often does not invest enough time and effort in the education process, which typically falls on professionals like us to relay important information.
However, it appears the plight of many young parents was communicated, and HMRC has introduced reforms. As of September 2025, we have a new way of reporting HICBC. You will no longer be required to complete a tax return. However, before we get there, let’s discuss some important factors that will help you decide whether you need to report anything at all.
What is adjusted net income?
HICBC applies based on an individual’s adjusted net income, rather than household income. Adjusted net income broadly means taxable income after certain deductions, including:
- Gross pension contributions
- Gross Gift Aid donations
- Certain trading losses
This definition is important because individuals may be able to reduce their adjusted net income and therefore their HICBC exposure through legitimate tax planning, such as pension contributions or salary sacrifice arrangements.
How HICBC works
A key feature of HICBC is that it applies to the highest earner in the household, regardless of who actually claims Child Benefit. This can lead to unexpected outcomes, as the individual paying the charge may not be the parent or guardian of the child or children named on the Child Benefit claim.
When HICBC was first introduced, it applied where an individual’s adjusted net income exceeded £50,000. From 6 April 2024, this threshold increased to £60,000, providing some relief for affected families.
Since April 2024, the charge works as follows:
- HICBC is charged at 1% of the Child Benefit received for every £200 of adjusted net income above £60,000.
- Child Benefit is fully clawed back where adjusted net income reaches £80,000 (previously £60,000) or more.
For example, if you are a higher earner with an adjusted net income of £70,000, you would repay 50% of the Child Benefit received in the year. Once income exceeds £80,000, the full amount of Child Benefit is effectively lost through HICBC.
Because the threshold applies to each individual rather than to the household, it can lead to unexpected results. This has often been viewed as unfair to families in which only one parent works. This rule still hasn’t changed.
For example, a family where two partners each earn £50,000 (a combined income of £100,000) would face no HICBC at all. In contrast, a household where one partner earns £80,000 and the other has no income would lose the Child Benefit in full.
Paying the HICBC
Historically, paying HICBC has not always been straightforward. Individuals affected by the charge have had two main options:
- Opt out of receiving Child Benefit payments, or
- Register for self-assessment and pay the HICBC through an annual tax return.
To do this, taxpayers needed to register for self-assessment by 5 October following the end of the tax year in which the charge arose.
Where the total tax liability due to HMRC was under £2,000, there was sometimes the option for HMRC to collect the HICBC through a future PAYE coding notice, but this did not allow the charge to be paid in real time for the year in question.
Roll out the new HICBC service
In September 2025, HMRC introduced a new HICBC service designed specifically for employees who have no other reason to complete a self-assessment tax return.
The purpose of the service is to:
- Remove the need for affected employees to file a tax return solely because of HICBC
- Allow HICBC to be collected through PAYE
- Enable the charge to be paid closer to the tax year it relates to
This new option sits alongside the existing routes of self-assessment or opting out of Child Benefit and is entirely optional.
Who can use the new service?
Individuals have until 31 January following the end of the tax year to sign up for the service.
If you have previously registered for self-assessment, you must deregister before you can use the new HICBC service, provided you have no other requirement to complete a tax return.
We would therefore recommend that you do so now. Deregister for Self-assessment and register for the new HICBC service and pay through PAYE. The reason for this advice is to allow you to come out of self-assessment, which can be burdensome and costly if you pay a professional.
However, before you take any such step, please make sure you reflect upon how this adjustment will affect your net pay each month. If necessary, perform the calculations first to ensure clarity.
Here’s more on how to sign up for HICBC service
Are you an employer?
HICBC is a personal tax charge and does not create direct obligations for employers. However, employers may notice changes to PAYE coding notices for employees who opt into the new HICBC service.
HICBC can also play a role in discussions about pay and benefits.
You may find that a pay rise pushes an employee over the £60,000 threshold; it may be better to offer alternative benefits.
As a result, some employees may look to salary sacrifice some of their wages to reduce their adjusted net income and manage their HICBC exposure. Common examples include:
- Increased employer pension contributions
- Electric vehicle schemes
- Cycle to work schemes
Final thoughts
The High Income Child Benefit Charge is a complex and sometimes controversial aspect of the tax system. Although recent changes have made it easier for some families, the relationships between income levels, household structures, and payment methods can still catch people off guard.
We are experts in both income tax and payroll and are happy to help employers and employees navigate this complex area.
We would say that if you are not sure about your personal situation, you should carefully check your adjusted net income. You may also want to contact HMRC or seek professional tax advice to ensure compliance with the rules and to make the most of the options available to you.
Here’s more on how we can help you with your taxes.