Thousands of families are missing out on easier way to repay child benefit

Thousands of families are missing out on an easier way to pay the high-income child benefit charge (HICBC), analysis shows.

More than 9 out of 10 families eligible to pay the charge automatically – rather than filling out via a tax return – missed out on doing so this year, according to figures obtained by wealth manager Quilter.

Child benefit is a UK government payment designed to help parents with the costs of raising a family, but those earning over £60,000 have to start repaying it via a tapered charge.

Until recently, the only way to do this was via filling out a self-assessment tax return, but a change at the last Budget means people who are employed and don’t need to file a return for any other reason can now have the money taken straight from their pay.

The change was important because experts think lots of families don’t claim the benefit at all to avoid filing out a return.

Freedom of Information (FOI) data from HMRC, obtained by Quilter, shows that 8,840 people used the digital pay as you earn (PAYE) service – where the money is taken straight from your salary – last tax year, with a further 1,239 having signed up so far in 2026/27.

This is a small number compared to previous figures collected by Quilter via an FOI request, which showed that 126,000 taxpayers filled in a self-assessment in 2022/23 – before the change – to pay the HICBC when all their income sources were either employee earnings or pensions.

These people would be eligible to repay under the new system, so Quilter’s comparison of the figures shows that more than 9 in 10 could be missing out on the easier method.

Shaun Moore, tax and financial planning expert at Quilter, said: “It is laudable that the government has opted to introduce a PAYE-based system for collecting the HICBC, and it is understandable that a reform of this nature may take time to bed in.

“However, the low take-up so far suggests that awareness remains limited and that many families simply do not realise an alternative to self-assessment now exists. As a result, people may be continuing to file tax returns unnecessarily.

“We also need to recognise this issue is likely to grow rather than fade. Strong wage growth combined with frozen thresholds means more families will continue to be brought into scope over time, including many for whom the policy was never originally designed.”

If you’ve not paid the charge before, you can sign up to have it collected via your tax code on the government website, but if you already pay via self-assessment and want to switch, you need to call HMRC.

The threshold for repaying HICBC was raised from £50,000 to £60,000 in 2024. Now, you start repaying some of the charge at £60,000 and by the time you earn £80,000, you repay the whole amount.

Someone with two children in the 2026/27 tax year earning £65,000 could receive up to £2,382.35 in Child Benefit but would need to pay back £595 in tax.

This means someone on this salary who did not sign up to the benefit because they did not want to have to fill out a self-assessment form could gain £1,787.35 simply by signing up.

It’s worth claiming the benefit even if it is claimed back from you in full via the charge, as it can make you eligible for a state pension. The person claiming the child benefit automatically receives national insurance (NI) credits, and these determine eligibility for the state pension – with 35 years needed to claim the full payment.

This can make it important for those who aren’t working – so wouldn’t build an NI record otherwise – but have a high-earning partner.

If you earn over the £60,000 threshold, there are also ways to avoid paying the charge.

The threshold used is calculated on your adjusted net income after pension contributions are made.

If you reduce your net adjusted pay by increasing your pension payments via salary sacrifice, you can avoid the charge or pay a smaller amount.

An HMRC spokesperson said: “This new simple and straightforward system takes the stress out of paying the HICBC. We’d encourage anyone who has PAYE income and has to pay this charge to sign up if they are eligible.”

المصدر: iNews