The number of High Income Child Benefit Charge penalties issued to families has plummeted by 99%, according to new data from Quilter.
A Freedom of Information request to HM Revenue & Customs revealed that in the 2023/24 tax year, just 75 penalties for ‘Failure to Notify’ were issued, down from 7,007 the year before.
The total value of penalties charged also fell steeply from £4.5 million to £45,443.
Quilter said only 46 penalties have been issued so far in 2024/25, suggesting the collapse is not a one-off.
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 relies upon the higher earner recognising this and notifying HMRC themselves.
The policy has come under heavy criticism 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.
While Labour acknowledged during the election campaign that the current system was unfair, it 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.
Holly Tomlinson, financial planner at Quilter, said: “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. 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.”
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