PAYE and the High Income Child Benefit Charge: What has changed in 2025

HMRC have introduced a new service for taxpayers with a liability to the High Income Child Benefit Charge (HICBC) to pay the charge via PAYE without completing a self-assessment return if they are not required to file a return for another reason. This change, first announced in the Spring Statement 2025, will remove the need for self-assessment for thousands of individuals who currently file a return only because they receive Child Benefit and earn above the income threshold.

The new system supports HMRC’s ongoing digital transformation and promises to reduce administrative burdens for higher earners taxed entirely through PAYE.

How the new PAYE system for HICBC will work

The digital service allows taxpayers to declare whether they or their partner received Child Benefit during the tax year. HMRC will assess whether the individual’s income exceeds the HICBC threshold and, if so, adjust their tax code to collect the charge gradually through monthly payroll deductions.

This process mirrors how HMRC already collects tax owed on underpayments or taxable benefits. For many, this new system eliminates the need to register for self-assessment or file a return, streamlining the entire compliance process.

Who pays the High Income Child Benefit Charge?

You become liable for the HICBC when either you or your partner claims Child Benefit and one of you earns more than £60,000 in adjusted net income. HMRC defines adjusted net income as total taxable income after pension contributions, Gift Aid donations, and certain allowable deductions. The HICBC claws back Child Benefit at a rate of 1% for every £200 of income between £60,000 and £80,000. By the time income reaches £80,000, the HICBC will be 100% of the Child Benefit received.

The higher earner in the couple must pay the charge, even if they are not the one claiming the Child Benefit payments. Once income reaches £80,000, the charge effectively cancels out the benefit in full.

Prior to the introduction of the new digital service, anyone liable for the HICBC was required to register for self-assessment and submit an annual tax return, regardless of whether all their other income was taxed under PAYE. The new service offers an alternative that better reflects how most employees manage their tax affairs.

What the HICBC PAYE change means for tax reporting

For those affected, the update will bring a notable shift in how the charge is reported and collected:

• You will no longer need to register for self assessment solely because of HICBC (if you meet certain criteria).
• HMRC will adjust your PAYE tax code after you report Child Benefit details through their new digital service.
• Employers will collect the charge automatically through payroll.
• This reduces the risk of missed deadlines and removes the need for manual tax returns for many affected taxpayers.

However, if you meet any other self-assessment criteria for example you receive untaxed income, such as rental profits, dividends, or capital gains, or if you are self-employed, you will still need to file a tax return as usual.

Why the change matters

This update represents more than just a new tax collection method. It marks a broader shift in how HMRC manages compliance for middle and higher-income earners.

Under the current system, many individuals fall into self assessment despite having simple financial affairs. This has created unnecessary complexity and led to penalties for those unaware of the rules. By integrating HICBC collection into PAYE, HMRC is offering a more modern and user-friendly solution, one that matches how most people already pay their taxes.

How to prepare for the HICBC update

If you or your partner receives Child Benefit , it is wise to review your household income and Child Benefit status now as if your income approaches or exceeds £60,000, you may fall within the scope of the charge.

Now is also a good time to check your PAYE tax code and ensure that HMRC holds accurate records for you and your partner. HMRC will use this data to determine your liability and apply the correct code adjustments.

If you are unsure how the change might affect you, or whether you can leave self assessment now the digital system has been launched, you should seek advice now. A proactive review can prevent errors and unexpected tax liabilities.

Get in touch

If you’re unsure whether the changes apply to you or would like support reviewing your PAYE code or Child Benefit position, our Rayner Essex tax team is here to support you.