Plan to deduct high income child benefit charge via PAYE

As more people are dragged into higher rate tax, the government is taking action to ensure that anyone liable for the high income child benefit charge (HICBC) will not be able to avoid the tax

Sara White, Editor, Accountancy Daily

A single paragraph announcement in this week’s legislation day documentation said that the government plans to deduct the high income child benefit charge directly from salaries via PAYE.

In a written statement to MPs, Victoria Atkins (pictured), 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.’

There are no further details at this stage about how this would work in practice or the notification process for taxpayers.

The HICBC is payable where a household receives child benefit and at least one person in the household with parental responsibility has taxable income in excess of £50,000. Regardless of who in the household receives child benefit, the HICBC is payable by the household’s higher earner, who may have to pay back some or all of the child benefit received during each tax year.

Jon Stride, vice chair of the Association of Taxation Technicians (ATT) technical steering group, said: ‘The HICBC has been a cause of confusion for taxpayers since it was introduced in 2013.

‘Under current rules, where the higher earner in a household is affected by the HICBC, they have to register for self assessment and submit tax returns every year in order to pay the charge. People with otherwise simple straightforward tax affairs can be unaware that they need to file tax returns because of the HICBC.

‘Details of the proposed changes are still to be confirmed, but those potentially affected by the HICBC may not have to file a tax return in future unless they need to be in self assessment for other reasons.

‘The current HICBC compliance system creates unnecessary administration for taxpayers and HMRC alike. We urge the government not to delay in issuing draft legislation to enact the change for consultation. At a time when HMRC are struggling to cope with demand, a simplification and reduction in the number of tax returns required would be a blessing for all concerned.’