16 Apr 2024

‘I had never heard of it’ – the parents caught out by the child benefit charge

Some 355,000 parents were made to pay back £405m to the taxman in 2020-21

Parents now have to start paying back child benefit when one of them earns £60,000 instead of £50,000, but families should make sure they understand the rules.

Which? has heard from a number of parents who've been caught out by the ‘high-income benefit charge’ and penalised with hefty tax bills and fines.

Here we explain more about what the charge is, and how parents have fallen foul of it in the past.

What is the high-income child benefit charge?

Child benefit is a monthly government payment to anyone who is responsible for a child. The payments you receive are based on how many children you're responsible for, with a higher rate for the eldest (or only) child.

Under the current rules you'll pay a tax charge – known as the high-income child benefit charge – if either you or your partner has an annual income over £60,000 (up from £50,000 in 2023-24).

The tax charge equates to 1% of the benefit for every £200 between £60,000 and £80,000. This means that if either parent earns more than £80,000, the benefit must be paid back in its entirety.

HMRC says that individuals who are liable for the charge, and who don’t file self-assessment tax returns, must inform HMRC that they are liable within six months of the end of the tax year.

Those who fail to do so may be liable for an additional penalty charge. Penalties usually start at £100 and ramp up the longer you leave the bill unpaid.

Some 355,000 parents were made to pay back £405m to the taxman in 2020-21, according to figures from HMRC.

Find out more: Child benefit rates and calculator 2024-25

‘I had never heard of it’

HMRC does not publish figures on the number of parents who failed to pay the charge on time, but Which? has heard from a number of parents who told us about their shock and distress when they found out they were liable for the charge.

One parent wrote to us on social media and said: ‘Six years it took them to tell me that I owed the money back, apparently it was well publicised at the time they introduced it, but I wasn’t over the threshold at that time!’

Another told us: ‘I had to pay back 2.5 years' worth. £2,700 in tax charges and £4,500 in late filing penalties.’

One parent shared her story with us in more detail.

Claire (45) is a single mother from Swansea who works and cares for her 17-year-old daughter.

‘I have never been a huge earner,’ said Claire. ‘In 2018 I got a new job as a civil servant and my salary went to around £41k, but in 2021 I switched roles and started earning more.

‘Then in November 2023 I had a letter from HMRC to tell me that I may not be aware of the higher-income child benefit charge and that I might be liable. They were right, I had never heard of it!'

Claire quickly worked out that she owed HMRC around £700 thanks to her increased take-home pay. She then had to register to do a self-assessment tax return, something she'd never done before, and told us she found the process ‘frightening’.

‘I had to pay it out of my savings,’ said Claire. ‘I had been saving a pot for a bathroom renovation, but I’ve had to put that on hold.

‘I didn't want to ring them or try to negotiate or explain what had happened because I was terrified that I was in trouble. I felt quite stupid for not knowing about the charge in the first place and I felt like it was my mistake.'

Claire went on to tell us that she thinks the charge is unfair, particularly because it currently kicks in when either parent’s income breaches the threshold, rather than assessing overall household income.

The system has come in for a great deal of criticism because currently two parents earning £59,000 each would not be liable for the charge, but a single parent earning more than £60,000 would trigger it.

‘I don't think the situation is clear at all,’ said Claire. ‘I think they should write to all parents every year to remind them about the charge.

‘I fundamentally feel that it's wrong to make a benefit available to someone and then ask for it all back.’

Find out more: 5 things you may not know about child benefit

How to pay the tax charge

The tax charge must be paid by whoever earns the high salary via a self-assessment tax return. If you fail to notify HMRC then you may also have to pay a ‘Failure to Notify’ penalty.

However, there are certain circumstances where this additional penalty may be waived. HMRC’s guidance on ‘Failure to Notify’ penalties explains that a penalty is not charged if all of the following apply:

You have a reasonable excuse for the failure
The failure was not deliberate
You told HMRC without unreasonable delay after your reasonable excuse ended

A reasonable excuse is something that stopped you from meeting a tax obligation on time which you took reasonable care to meet. It might be due to circumstances outside your control or a combination of events.

HMRC notes that there is no statutory definition of a reasonable excuse, rather it is ‘a matter to be considered in the light of all circumstances of the particular case’.

Future changes to child benefit

In addition to raising the threshold at the 2024 Spring Budget, the Chancellor also announced a consultation to move the high-income child benefit charge to a household-based system which should take into account both parents’ earnings.

According to the Chancellor this new system should be in place by April 2026, although it’s not currently clear whether this would involve another increase to the threshold.

When we put our findings to the government, a spokesperson told us: ‘The government plans to end the unfairness for single-earner families in the child benefit system by administering the high-income child benefit charge on a household basis from April 2026 and will consult in due course.

‘The vast majority of customers comply with the charge and we’re continually looking at ways to make this easier. Where we have the right information, we write to customers who may need to pay it and we include a reminder on the child benefit claim form.’