High Income Child Benefit Charge: Discovery Assessments & the New PAYE Option

The High Income Child Benefit Charge is one of the most common triggers for an HMRC discovery assessment and failure-to-notify penalty, not because the rules are complicated, but because liability depends on a fact many households do not think to monitor: a partner's income creeping over a threshold that has nothing to do with the person who actually claims the benefit.

How the Charge Works

Child Benefit itself is paid regardless of income. The High Income Child Benefit Charge is a separate income tax charge that claws back some or all of the value of Child Benefit received by a household where one partner's income exceeds the relevant threshold, regardless of whether that partner is the one who actually claims or receives the benefit. The charge is assessed against the partner with the higher adjusted net income in the tax year, even where the Child Benefit itself is paid to, and claimed by, the other partner.

The Current Threshold and Taper

Since 6 April 2024, the charge applies where the liable partner's adjusted net income exceeds £60,000, raised from the previous £50,000 threshold that had applied since the charge was introduced in 2013. The charge is calculated at 1% of the Child Benefit received for every £200 of adjusted net income above £60,000, meaning the charge equals the full value of the Child Benefit once adjusted net income reaches £80,000. Adjusted net income is total taxable income before personal allowances, adjusted for certain reliefs such as pension contributions and Gift Aid donations, which means pension contributions in particular can be an effective way of reducing adjusted net income below the threshold, or further down the taper, where the numbers are close.

Who Actually Pays

The New PAYE Payment Option

Historically, anyone liable to the charge had to register for and file a self-assessment return, even if their tax affairs were otherwise entirely straightforward and dealt with through PAYE, purely in order to declare and pay the charge. Since October 2025, taxpayers liable to the charge can instead choose to have it collected through an adjustment to their PAYE tax code, and those who were previously filing a return solely to pay the charge can opt out of self-assessment and switch to the PAYE route instead. From the 2026–27 tax year onwards, the charge reverts to being collected in the tax year to which it actually relates, rather than lagging behind as it previously could under certain administrative arrangements, which should reduce (though not eliminate) the retrospective assessment problem described below.

Why HICBC Generates So Many Disputes

Several structural features of the charge combine to make it an unusually rich source of HMRC enquiries and penalties relative to how simple the underlying arithmetic is. Income can fluctuate year to year, crossing the £60,000 threshold without any deliberate change in circumstances, such as a bonus, a pay rise, or a change of job. Household composition can change, with a new partner moving in with an existing Child Benefit claimant and immediately becoming potentially liable for a charge relating to a benefit they never claimed and may not have realised was even being received. And because there was, for many years, no automatic mechanism connecting HMRC's Child Benefit records to its income tax records for people not otherwise in self-assessment, the mismatch between income and Child Benefit receipt was often only identified by HMRC well after the event, sometimes years later, once data-matching exercises caught up.

Discovery Assessments and Failure to Notify

Where HMRC identifies, after the event, that HICBC should have been paid and was not, it typically proceeds either by way of a discovery assessment under section 29 TMA 1970, if a return should have been filed and was not, or by way of a failure-to-notify penalty under Schedule 41 FA 2008, for failing to notify HMRC of a new liability to tax within the statutory time limit. Because HICBC liability frequently arises without the liable person ever having filed a return in the relevant year, the ordinary self-assessment enquiry window rarely applies in the way it does for other tax disputes, and HMRC instead relies on the wider discovery and failure-to-notify machinery, with the associated extended time limits that can apply where HMRC characterises the taxpayer's conduct as careless or deliberate rather than simply an innocent oversight.

The Reasonable Excuse Argument

HMRC's default position in many HICBC penalty cases has been that a general lack of awareness of the charge, or of the relevant threshold, does not amount to a reasonable excuse for failing to notify. This blanket position has, however, come under sustained criticism in a number of tribunal decisions, particularly in relation to older liabilities arising before HICBC's introduction was widely publicised, and in cases where the liable partner genuinely had no realistic means of knowing that their partner's Child Benefit claim, or their own rising income, had triggered a liability. Tribunals applying the four-stage reasonable excuse framework have shown a willingness to look critically at HMRC's blanket "ignorance is no excuse" position where the specific facts show a taxpayer who took objectively reasonable care to understand their tax position and simply had no practical way of connecting the dots.

Practical Steps

• Check adjusted net income against the £60,000 to £80,000 band every year, particularly following a pay rise, bonus, new job, or a change in household composition.
• Consider pension contributions where income sits close to the threshold. Reducing adjusted net income through pension contributions can reduce or eliminate the charge, as well as securing the pension tax relief itself.
• Switch to the PAYE payment option where self-assessment was only being filed for HICBC. This removes an unnecessary annual filing obligation for many households.
• If HMRC raises a historic assessment or penalty, examine when and how the liability actually arose before assuming it must be paid in full; the reasonable excuse position on older or genuinely unknowable liabilities is stronger than HMRC's standard correspondence often suggests.
• Register promptly once a liability is identified, since an unprompted notification generally results in a materially lower penalty than one prompted by HMRC contact.

Frequently Asked Questions