Plans to simplify process for high income child benefit charge set out

The Government will later set out plans to enable employed people to pay through their tax code, without the need to register for self-assessment.

The tax charge is triggered when one parent in a household claiming child benefit has taxable income of £50,000 or more (Joe Giddens/PA) (PA Archive)

Parents who are liable for the high income child benefit charge will no longer have to register for self-assessment in the future in order to pay it.

Instead, employees will be able to pay through their tax code.

A written statement made by Victoria Atkins, the Financial Secretary to the Treasury, said: “The Government wants to simplify the process for customers who become liable to the high income child benefit charge, particularly for those who currently need to register for self-assessment to pay the charge.

“The Government will provide details in due course on how it will enable employed customers to pay through their tax code, without the need to register for self-assessment.”

The tax charge is triggered when one parent in a household claiming child benefit has taxable income of £50,000 or more.

It has always been a pointlessly admin-laden approach

Sarah Coles, Hargreaves Lansdown

People whose income is over the threshold can get child benefit payments and pay any tax charge at the end of each tax year or opt out of receiving payments and not pay the tax charge.

Sarah Coles, head of personal finance at Hargreaves Lansdown, described the move as a “really sensible step”.

She said: “It has always been a pointlessly admin-laden approach, dragging huge numbers of people into the tyranny of the tax return.

“It has also come with the risk that some people aren’t aware of the charge, or don’t realise it’s up to them to do all the legwork in order to pay it. At the moment, it’s perfectly possible to have overlooked the rule until you’re slapped with a tax bill for thousands of pounds.”

Ms Coles added: “The tax charge has always fallen unfairly on the shoulders of single parents, because it’s based on the income of the highest earner.

“It means they can have a household income of £50,000 and cross the threshold, while a couple can earn £49,999 each and still receive all their child benefit.

“There’s also the issue of what happens when you’re paid more than £60,000 – at which point, you have to pay all the child benefit back.

“Some people in this position don’t bother claiming at all.

“However, this can have serious implications if one parent takes time away from work to look after children. You may have years where you don’t pay enough national insurance (NI) to count towards the 35 years of contributions you need for a full state pension.

“If you claim child benefit, you receive NI credits that count towards your state pension until the child hits the age of 12, which will help you hit the target. If you don’t claim at all, you don’t get this credit either. In fact, you need to apply for child benefit and then opt out of receiving the money.”

Sir Steve Webb, a former pensions minister who is now a partner at consultants LCP (Lane Clark & Peacock), said the new process would presumably largely eliminate cases where people inadvertently fail to pay the charge.

He said: “One of the many flaws of the high income child benefit charge is the way it has caught thousands of families unawares.

“Parents with simple tax affairs who would not normally have to fill in a tax return have needed to do so once their annual income exceeded £50,000, perhaps because of a pay rise or bonus.

“Those who have failed to do so, often simply through lack of awareness of the system, have had to pay the charges and have also faced fines. After more than a decade of operating the charge, the Government has finally recognised that this system is not working.”