High Income Child Benefit Charge penalties collapse by 99%

22 April 2025

The number of penalties issued to families caught out by the High Income Child Benefit Charge (HICBC) has plummeted by 99%, according to new data obtained by Quilter, the wealth manager, through a Freedom of Information request to HMRC.

In the 2023/24 tax year, just 75 penalties for “Failure to Notify” (FTN) were issued, down from 7,007 the year before. The total value of penalties charged fell from £4.5 million to just £45,443. Only 46 penalties have been issued so far in 2024/25, confirming the collapse is not a one-off.

The news follows years of criticism that the rules were unfair, confusing, and disproportionately punitive. HMRC itself has noted in the FOI response that in recent years it has focused efforts on continuing to raise awareness of the HICBC and supporting taxpayers to comply, which has contributed to the decline in penalties.

Failure to Notify (FTN) penalties for HICBC:

*2024/25 is an incomplete year

The HICBC applies when an individual in a household earns over a certain income threshold and someone in the household claims Child Benefit. The charge claws back some or all of the benefit depending on income, but the system relies on the higher earner recognising this and notifying HMRC themselves – often triggering a requirement to complete a Self Assessment tax return for the first time.

The policy has been heavily criticised for its reliance on individual income rather than household income, meaning that a single parent earning over the threshold can lose all their Child Benefit, while a couple each earning just below the threshold can retain the full amount despite having a higher overall household income.

After significant pressure, including widespread media scrutiny, the Conservative government committed in the 2024 Spring Budget to reforming the system, with plans to move to a household-based assessment by April 2026. At the same time, the income threshold was increased for the first time since the policy was introduced — rising from £50,000 to £60,000, with the taper now stretching to £80,000.

However, since taking office, the Labour government has rowed back on the commitment to move to a household-based assessment. Despite acknowledging during the election campaign that the current system was unfair and penalised single-earner households, Labour has since said that the proposed reform would be too costly to implement, with Treasury analysis suggesting it could cost around £1.4 billion by 2029/30 if thresholds were raised to £120,000 to £160,000. As a result, the current system remains in place.

In the interim, the government has pledged to reduce the administrative burden for families by allowing those affected to repay the charge via PAYE from the summer of 2025, rather than requiring them to complete a full Self Assessment tax return.

Holly Tomlinson, financial planner at Quilter says:

“The collapse in these penalties is no accident — it reflects the pressure that has rightly built up over years about how unfair the system was. Huge media attention highlighted the absurdity of a single parent losing all their Child Benefit while a couple each earning just under the threshold could keep the lot. The government has finally accepted this doesn’t pass the fairness test and is now using carrot rather than stick to help people keep to the rules.

“In the meantime, families still need to tread carefully. If you opt out of receiving Child Benefit to avoid the charge, make sure the parent who is not working or earning less still gets their National Insurance credits, which count towards the State Pension. And for those hovering near the income threshold, salary sacrifice into a pension can be a wise financial planning tactic — it reduces your adjusted net income and can bring you back below the charge entirely.

“While Labour look set to let the clear inequalities remain baked into the system at least they are making it easier for people to pay back any additional child benefit they are not eligible for.”