High Income Child Benefit Charge Through Payroll

HMRC has now switched on its new service that lets parents pay the High Income Child Benefit Charge (HICBC) directly through PAYE, rather than completing a Self Assessment return. For employers, it’s another quiet but meaningful change to what your tax codes will look like over the next twelve months, and to the questions employees are likely to bring you.

At Pecunia Pro we’re already fielding queries from clients about how this works, what they need to do, and what employees should expect on their payslips. Here is the practical summary.

What is HICBC, in plain terms

The High Income Child Benefit Charge claws back Child Benefit from families where one earner has an adjusted net income above a threshold. From the 2024/25 tax year the threshold is £60,000, and the charge tapers up to £80,000, at which point all of the Child Benefit received is recovered through tax.

Until now, anyone affected has had to register for Self Assessment and pay the charge through their annual tax return. That added admin, and surveys consistently suggested a meaningful number of eligible families simply opted out of Child Benefit altogether to avoid the paperwork, even when it cost them National Insurance credits.

The new PAYE route

HMRC’s new online service, announced at the Spring Statement 2025, is now live. Once an eligible employee opts in:

• HMRC uses the real-time pay and tax information it already collects from your payroll submissions to calculate the charge.
• It then adjusts the employee’s tax code so that the charge is collected in equal slices through PAYE across the year.
• No Self Assessment return is needed purely for HICBC purposes.

The deadline for employees to register for the system to pay HICBC for the 2024/25 tax year is 31 January 2026. After that date, the only way to settle 2024/25 HICBC will be a Self Assessment return in the usual way.

What this means for employers

The charge is on the employee, not on the business, so this is not a new payroll deduction for you to set up. However, there are practical implications worth being aware of:

Tax code changes. Once an employee opts in, HMRC will issue a revised tax code. You should expect to see a higher number of coding notices through your payroll software, particularly during the first full year of the scheme. Each one should be applied promptly in the next pay run, as you would with any other coding change.

Employee queries. Affected employees will see lower take-home pay once the new code takes effect, even though their gross pay hasn’t changed. Some will assume this is a payroll error. A short FAQ or note from HR explaining that the change reflects their opt-in to HICBC via PAYE can save a lot of back-and-forth.

In-year changes. If an employee’s circumstances change during the year, for example a partner stops claiming Child Benefit, or income drops below the threshold, HMRC will reissue the code. Your payroll process should pick this up automatically, but it pays to spot-check.

A useful conversation to have with higher earners

Many SMEs have a handful of employees in the £60,000 to £80,000 bracket, and not all of them will be aware that the PAYE option even exists. For people who don’t otherwise need to file Self Assessment, this can be a genuine simplification.

Without straying into personal tax advice, employers can usefully:

• Flag the existence of the new service in internal communications.
• Direct employees to HMRC’s online guidance rather than offering an opinion on their personal tax position.
• Make sure your payroll team or provider is comfortable explaining coding changes if employees ask.

Where Pecunia Pro fits in

We’re seeing a clear uptick in coding notices coming through our clients’ payrolls as more employees use the new service. Our job is to make sure those codes are applied accurately and on time, that employee payslips remain easy to interpret, and that your finance team isn’t blindsided by changes that affect headline take-home pay.

We can also work with HR to draft simple, plain-English wording for staff communications, so the change is well understood rather than mistaken for a payroll mistake.

Want to make sure your payroll is handling the new HICBC coding changes smoothly? Call us on 020 8143 1529 or email info@pecuniapro.co.uk and we’ll talk you through how to brief your team and keep your payroll running cleanly.