High Income Child Benefit Charge - how to reduce it for 2026?

Gengis

Hi - I have just signed up for the HICBC to be paid by PAYE instead of by self assessment (the only reason I filed a self assessment was the HICBC). I will need to file a self assessment for 2025.  After reading some docs on the PAYE service, I am concerned I may be liable to pay the HICBC for 2025 & 2026 from April 2026.  The question I have is there anything I can do now to reduce the HICBC charge for 2026?

I was thinking about increasing, significantly, my pension contributions via Salary Sacrifice from say February or March 2026.

a)   If I did increase my pension contribution would I need to notify the HMRC of this and what may new gross salary is likely to be in 2026? 

b)   Would that reduce the HICBC I would have to pay for the 2026 Charge?  I accept this will not affect the 2025 HICB.

c)   Occasionally I get a small bonus around £2500 - £3000 per annum in June / July.  If I got this bonus in 2026 is there any advantage to notifying the HMRC immediately on receipt of the bonus or just allow the HMRC to make any adjustment at year end?

Thanks in advance.  Sorry it if comes across as a bit simple but the HICBC for me is overly complex especially for employees.

molerat

You simply put your expected annual income, which will be lower if increasing your sal sac amount, in your on line tax account.  If the bonus is discretionary you can adjust that figure once the bonus in confirmed.  HMRC will then adjust the coding accordingly.  Increasing your pension late in this tax year could have some effect on the coding for this year - you simply need to update your salary in your tax account.

Gengis

Ok thanks I think I may wait until March 2026 to increase the sal sac as i will be in a better position financially and will now for certain what may salary will be for 2026.  

Dazed_and_C0nfused

Gengis said:

Hi - I have just signed up for the HICBC to be paid by PAYE instead of by self assessment (the only reason I filed a self assessment was the HICBC). I will need to file a self assessment for 2025.  After reading some docs on the PAYE service, I am concerned I may be liable to pay the HICBC for 2025 & 2026 from April 2026.  The question I have is there anything I can do now to reduce the HICBC charge for 2026?

I was thinking about increasing, significantly, my pension contributions via Salary Sacrifice from say February or March 2026.

a)   If I did increase my pension contribution would I need to notify the HMRC of this and what may new gross salary is likely to be in 2026? 

b)   Would that reduce the HICBC I would have to pay for the 2026 Charge?  I accept this will not affect the 2025 HICB.

c)   Occasionally I get a small bonus around £2500 - £3000 per annum in June / July.  If I got this bonus in 2026 is there any advantage to notifying the HMRC immediately on receipt of the bonus or just allow the HMRC to make any adjustment at year end?

Thanks in advance.  Sorry it if comes across as a bit simple but the HICBC for me is overly complex especially for employees.

I think you have misunderstood this new service.  Or maybe read some misleading documents.

From what you have posted your current tax code will be adjusted to (provisionally) collect the HICBC due for 2025/26.  Ensuring HMRC have an accurate estimate of your expected earnings, the taxable pay figure you expect to see on your P60 next April, is a good way to keep this as accurate as possible.

HMRC will review the position for 2025/26 next summer(ish) and let you know if there is anything extra to pay (normally collected via your 2027/28 tax code) or a refund due (this comes back to you, not via a tax code adjustment).

Your tax code for 2026/27 will include a provisional deduction to collect the HICBC due for 2026/27 (assuming Child Benefit continues and your adjusted net income is high enough).

Your 2024/25 Self Assessment return will finalise anything payable for 2024/25 (the total owed, not just any HICBC element).  You may have to pay that direct to HMRC (if return filed after the 30 December deadline or it's more than £3k) or it could be included in your 2026/27 tax code, subject to meeting the early filing date and one or two other rules HMRC apply.  And how you answer a particular question on the return.

HMRC have no interest in your gross salary, whatever that might actually mean.  It's your taxable pay they are interested in and you will almost certainly know what that will end up being far better than HMRC could ever estimate.

The HICBC payable for 2025/26 will be based on your adjusted net income.  One element of which is your taxable pay.  So although you cannot deduct salary sacrifice contributions (they are employer contributions, not something you have paid into a pension) they will mean you have less taxable pay as your starting point for adjusted net income.

Keeping your expected earnings (P60 pay figure) upto date on your Personal Tax Account is sensible but at the end of the day a tax code is only ever provisional, the actual HICBC will be established after the end of the tax year.  It matters not a jot if you are in Self Assessment or not as far as that is concerned.

HICBC is very straightforward really, I think people can over think things sometimes!

Gengis

Thanks i read there is a risk of paying 2 HICBCs with this new service from April 2026 is that right? 

Dazed_and_C0nfused

Gengis said:

Thanks i read there is a risk of paying 2 HICBCs with this new service from April 2026 is that right? 

Yes, that is possible.  You could be paying something towards it for 3 tax years in some cases.

But for you a lot will depend on how you complete your 2024/25 tax return.  And the amount you owe (in total) from that return.

Paying any liability for 2024/25 in January 2026 will avoid tax/HICBC for that tax year from being included in your 2026/27 tax code though.  There is a box on the 2024/25 return you complete which tells HMRC what your preference is for paying anything owed for 2024/25.

Gengis

Thanks - very helpful and much appreciated.  Looking at the figures I may just increase my pension contribution by 6% as my adjusted income will fall just fall under £60k.  Take a bit of hit on my net pay in the short term but eventually avoid the HICBC all together.

Dazed_and_C0nfused

Gengis said:

Thanks - very helpful and much appreciated.  Looking at the figures I may just increase my pension contribution by 6% as my adjusted income will fall just fall under £60k.  Take a bit of hit on my net pay in the short term but eventually avoid the HICBC all together.

Depending on how many kids Child Benefit is being paid for extra pension contributions (including salary sacrifice) can be incredibly tax efficient once HICBC is a factor.

Don't forget you need to include all taxable income when calculating ANI, even interest or dividends that are taxed at 0%.

Gengis

Hi - I think I have go my head around this now, apart from my salary I do not have any other income, so what I have or will do is;

a)    2024 / 2025 - file my self assessment return by 31.12.25 and pay the 2025 HICBC in 2026 / 2027 year.

b)    2025 / 2026 - today I increased my pension contribution by 6% which takes me just under £60k from today, so I will still have to pay the HICBC for 2026 in 2026 / 2027 but the increase in pension will reduce it.  I will notify the HRMC of my adjusted net income in March 26 so they can adjust my tax code at the start of the tax year.

c)   2026 / 2027 - notify the HMRC in March 26 that may expected income will be below £60k due to the increase in pension contributions so they will not need to deduct anything for the HICBC for that year. 

I think that is right and not much more I can do now to reduce the HICBC.  I will also notify the HMRC of any bonus payment on receipt.  Any pay rise I get i will just increase the pension contribution to keep it under £60k for the time being.  

Seems bit draconian to potentially take 3 lots of HICBC in one tax year. 

Does that sound right - thanks for your help it is very much appreciated. 

Dazed_and_C0nfused

Gengis said:

Hi - I think I have go my head around this now, apart from my salary I do not have any other income, so what I have or will do is;

a)    2024 / 2025 - file my self assessment return by 31.12.25 and pay the 2025 HICBC in 2026 / 2027 year.

b)    2025 / 2026 - today I increased my pension contribution by 6% which takes me just under £60k from today, so I will still have to pay the HICBC for 2026 in 2026 / 2027 but the increase in pension will reduce it.  I will notify the HRMC of my adjusted net income in March 26 so they can adjust my tax code at the start of the tax year.

c)   2026 / 2027 - notify the HMRC in March 26 that may expected income will be below £60k due to the increase in pension contributions so they will not need to deduct anything for the HICBC for that year. 

I think that is right and not much more I can do now to reduce the HICBC.  I will also notify the HMRC of any bonus payment on receipt.  Any pay rise I get i will just increase the pension contribution to keep it under £60k for the time being.  

Seems bit draconian to potentially take 3 lots of HICBC in one tax year. 

Does that sound right - thanks for your help it is very much appreciated. 

a) the return has to be filed on or before 30 December if you would like the possibility of paying any Self Assessment liability via your 2026/27 tax code.
https://www.gov.uk/self-assessment-tax-returns/deadlines

b) not sure why you think the 2025/26 HICBC will be payable in 2026/27?  It's highly likely to be mainly paid in 2025/26, with any adjustment (assuming not £3k or more) being included in your 2027/28 tax code.

c) that's sounds ok.  I don't think you can update your expected earnings for 2026/27 until after your first tax code for that tax year had been calculated.

Paying for three years in one would be quite unusual but I don't think it's impossible.