High income child benefit charge and conversion to PAYE - help

TeamSith

Hi folks,
Apologies for the long first post! This is about understanding tax rather than cutting it, but I figured this forum was the best place to ask, hope that's ok. I cannot find anything on gov.uk that is useful and phoning HMRC did not help.

I'm hoping someone can help me understand my tax situation with respect to the high income child benefit charge (HICBC) either by explaining the calculation used to determine deductions when one converts it to pay via PAYE, or by explaining how it has worked for them as a comparison point.

We have two kids so we are paid child benefit of approximately £2200 pa. I earn enough that I have to pay all of it back (but not enough to reduce my personal allowance). The child benefit is in my wife's name but she has no significant earnings so I have always paid the charge. I dislike having to fill in a self assessment every year just for this reason so when it recently became possible convert to paying by PAYE, I signed up to this (by telephone with HMRC).

I had not already paid the HICBC or done anything in self assessment for the 24/25 tax year. Guidance says you can pay the tax charge through PAYE "if it’s on or before 31 January in the year after the tax year you need to pay for", so I assume this would be the situation for most people, wanting to set PAYE up instead of completing their self assessment for 24/25. I cannot remember if the woman on the phone from HMRC explicitly asked me whether I had already paid the HICBC for 24/25, but I assume she had access to that information on my account. As part of the application on the phone my self assessment for 24/25 was closed out by HMRC (I confirmed there was no other reason for me to complete one apart from the HICBC). I asked the woman on the phone if she could explain how the PAYE deductions would be calculated so that I could confirm it had all been processed correctly when I received my first adjusted payslip, but she said she couldn't tell me anything about that because PAYE was dealt with in a different team.

I subsequently received my October 2025 payslip (the first accounting for the change) and my tax code had changed from 1257L to 147L. As a result my net pay was reduced by approx £360. This initially came as a bit of a shock because it's around double the (HICBC / 12). I can see via my online gov.uk account that two tax code adjustments have been made related to child benefit but it doesn't explain what each is for. I thought one might be for the 24/25 HICBC and one for 25/26. However on phoning up HMRC again - this time the PAYE team - they explained that it was actually because I have switched to PAYE half way through the tax year. So one of the adjustments is to recover HICBC for the month of that payslip and the other adjustment is to ensure that HICBC is also recovered for the months May-September by the time we get to April. I was told they will remove that second tax code adjustment from next April.

This makes sense but I am now left wondering whether this means:

(1) everything is correct and I am effectively paying HICBC via PAYE a year in arrears (ie, deductions in 25/26 to pay back the child benefit we received in 24/25) and this will continue (although this seems surprising to me, it is nevertheless the closest to the self assessment position, in that previously I obviously paid HICBC for a particular tax year part way the following tax year), or

(2) everything is correct but tax code will be automatically adjusted next April so that I pay double the monthly HICBC cost (total annual charge / 12) for the full 26/27 tax year as well as the remainder of 25/26, in order to recover the child benefit we were paid in 24/25, or

(3) something has gone wrong and the monthly PAYE deduction should actually be even higher than it is in order to also recover the child benefit we were paid in FY24/25, or

(4) I should have been told to pay back the FY24/25 child benefit via self assessment before converting to PAYE, and I now actually owe an additional ~£2200 in tax via self assessment that I haven’t paid (this would seem bizarre since the website explicitly gives the guidance I quoted above).

Is anyone able to confidently explain this, or is anyone in a similar situation (switched to paying full HICBC via PAYE without having paid for FY24/25 via self assessment) and is happy to share how the PAYE adjustment has worked out for them, for comparison purposes?

Many thanks!

Dazed_and_C0nfused

From what you have posted I would explain you to be paying HICBC like this,

2024/25 - collected via 2026/27 tax code (assuming the total amount owed, including whatever tax you owe is less than £3k)

2025/26 - collected via 2025/26 code

2026/27 - collected via 2026/27 code

Maybe you could provide the details of the new tax code (the full breakdown).

kimwp

Do you know that you can sign up to child benefit to get all the other benefits, NI for your wife etc, but not actually take the money (and therefore don't have to return it)? 

TeamSith

kimwp said:

Do you know that you can sign up to child benefit to get all the other benefits, NI for your wife etc, but not actually take the money (and therefore don't have to return it)? 

Thanks, I think I had seen that before,  but only longer after starting to receive it, so decided just to stick with what we were doing. 

TeamSith

Dazed_and_C0nfused said:

From what you have posted I would explain you to be paying HICBC like this,

2024/25 - collected via 2026/27 tax code (assuming the total amount owed, including whatever tax you owe is less than £3k)

2025/26 - collected via 2025/26 code

2026/27 - collected via 2026/27 code

Maybe you could provide the details of the new tax code (the full breakdown).

Thanks, I'm not quite sure what you mean by the full break down? All I have is this. Both reductions are new and related to this change.
Should there be more information somewhere?

"Your tax code for (redacted) is 147L Week1/Month1

How your tax-free amount is calculated

Personal Allowance

£12,570

What decreases your tax-free amount

Adjustment for estimated tax of £1,126.00 you owe for this year

£5,465

High Income Child Benefit Charge

£5,627

Your tax-free amount for this employment is £1,478."

Dazed_and_C0nfused

TeamSith said:

Dazed_and_C0nfused said:

From what you have posted I would explain you to be paying HICBC like this,

2024/25 - collected via 2026/27 tax code (assuming the total amount owed, including whatever tax you owe is less than £3k)

2025/26 - collected via 2025/26 code

2026/27 - collected via 2026/27 code

Maybe you could provide the details of the new tax code (the full breakdown).

Thanks, I'm not quite sure what you mean by the full break down? All I have is this. Both reductions are new and related to this change.
Should there be more information somewhere?

"Your tax code for (redacted) is 147L Week1/Month1

How your tax-free amount is calculated

Personal Allowance

£12,570

What decreases your tax-free amount

Adjustment for estimated tax of £1,126.00 you owe for this year

£5,465

High Income Child Benefit Charge

£5,627

Your tax-free amount for this employment is £1,478."

That is the breakdown and those two entries are only collecting extra tax for 2025/26.  Not any other tax year.

sheramber

As you have not paid back any child benefit in the months from April to September the whole amount must now be collected  over the 6 months from October to  March, meaning a double amount is deducted each month. 

Your charge for 24/25 will be collected over 26/27  along with the charge for 26/27 if payable.  Two charges therefore double deductions. 

For 27/28. it should be back to one year’s deduction only. 

TeamSith

sheramber said:

As you have not paid back any child benefit in the months from April to September the whole amount must now be collected  over the 6 months from October to  March, meaning a double amount is deducted each month. 

Your charge for 24/25 will be collected over 26/27  along with the charge for 26/27 if payable.  Two charges therefore double deductions. 

For 27/28. it should be back to one year’s deduction only. 

Ok thanks. If so that is reassuring as I know everything is in order and how/when the money will be paid.
Can I ask, how you know the tax code adjustment for 26/27 will be made to pay the charge for 24/25? I haven't seen anything that explains that. Should this happen automatically?  I can of course make a note to check.

Dazed_and_C0nfused

TeamSith said:

sheramber said:

As you have not paid back any child benefit in the months from April to September the whole amount must now be collected  over the 6 months from October to  March, meaning a double amount is deducted each month. 

Your charge for 24/25 will be collected over 26/27  along with the charge for 26/27 if payable.  Two charges therefore double deductions. 

For 27/28. it should be back to one year’s deduction only. 

Ok thanks. If so that is reassuring as I know everything is in order and how/when the money will be paid.
Can I ask, how you know the tax code adjustment for 26/27 will be made to pay the charge for 24/25? I haven't seen anything that explains that. Should this happen automatically?  I can of course make a note to check.

You should get a P800 calculation from HMRC showing the tax liability (including any HICBC due) for 2024/25 fairly soon now you have come out of Self Assessment for that year.

This is unlikely but if you get a PA302 (Simple Assessment) for 2024/25 it means you have to pay HMRC direct, anything you owe for 2024/25 won't be included in your 2026/27 tax code.

TeamSith

Dazed_and_C0nfused said:

TeamSith said:

sheramber said:

As you have not paid back any child benefit in the months from April to September the whole amount must now be collected  over the 6 months from October to  March, meaning a double amount is deducted each month. 

Your charge for 24/25 will be collected over 26/27  along with the charge for 26/27 if payable.  Two charges therefore double deductions. 

For 27/28. it should be back to one year’s deduction only. 

Ok thanks. If so that is reassuring as I know everything is in order and how/when the money will be paid.
Can I ask, how you know the tax code adjustment for 26/27 will be made to pay the charge for 24/25? I haven't seen anything that explains that. Should this happen automatically?  I can of course make a note to check.

You should get a P800 calculation from HMRC showing the tax liability (including any HICBC due) for 2024/25 fairly soon now you have come out of Self Assessment for that year.

This is unlikely but if you get a PA302 (Simple Assessment) for 2024/25 it means you have to pay HMRC direct, anything you owe for 2024/25 won't be included in your 2026/27 tax code.

OK thanks.