Key takeaways
- HICBC: Parents may need to repay all or part of any child benefit received where the higher-earning partner has income in excess of £60,000.
- HMRC contact: HMRC believes that some parents who should have paid the HICBC have yet to do so and is asking them to take action.
- Next steps: Taxpayers with HICBC liabilities for 2024/25 should register for self assessment. It may be possible to pay the HICBC for 2025/26 through pay as you earn.
The HICBC
A person may claim child benefit after their child is born or a child comes to live with them. If the claimant or their partner has adjusted net income (ANI) over the threshold amount, the higher earner will need to repay some or all of the child benefit. This is collected by HMRC and is known as the HICBC.
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HMRC campaign
HMRC is writing to taxpayers where its records indicate that the taxpayer:
- is required to pay the HICBC for 2024/25 and 2025/26 based on their ANI for those years; and
- has not registered for income tax self assessment (SA) and included the HICBC in their tax return for 2024/25.
Taxpayers who receive a letter from HMRC are advised "take action now" in order to "avoid a compliance check and higher charges due to penalties".
Calculating the HICBC
For 2024/25 onwards, the child benefit is clawed back via the HICBC at the rate of 1% for every £200 that the taxpayer's ANI exceeds £60,000. This means that it is clawed back in full where the taxpayer's ANI exceeds £80,000. Taxpayers can use HMRC's online tool to calculate how much child benefit they received, their ANI and their HICBC liability.
The method for calculating the HICBC was changed with effect for 2024/25 onwards. An earlier article explains the rules applying before 6 April 2024.
The person who receives the child benefit may not necessarily be the person who pays the HICBC, as the HICBC is paid by the partner with the highest amount of ANI. HMRC's letter includes a useful flowchart which can be used to help determine who pays the HICBC.
Paying the HICBC
If the taxpayer believes that they have a HICBC liability for 2024/25, they should register for SA and complete a tax return.
For 2025/26, the taxpayer may be able to pay through their pay as you earn (PAYE) tax code on GOV.UK or in the HMRC app. HMRC has published guidance that explains the process in detail.
Opting out of child benefit
It is possible for an existing child benefit claimant to opt out of receiving child benefit payments in the future, which avoids the need to do a tax return if they have no other reason to be in SA. A claimant who opts out retains:
- their entitlement to national insurance credits towards their state pension; and
- their child’s entitlement to receive a national insurance number ahead of their 16th birthday.
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