EXCLUSIVE Penalties for failing to declare child benefit on tax return plummet as Government eyes changes

Daily Mail​

22-04-2025

The number of child benefit penalties paid out plummeted by 99 per cent last year, according to new figures shared with This Is Money.
Child benefit is available to all families, but the Government starts to claw it back from households where the highest earner has an income above £60,000, after Jeremy Hunt raised the threshold from £50,000 in his last Budget.
Child benefit is then withdrawn completely once the highest earner makes over £80,000.
Higher earners who do not opt out of payments need to pay a tax charge at the end of the tax year and declare it on their self-assessment tax return or face a penalty.
Changes to the system mean that penalties collapsed by 99 per cent between 2023 and 2024, according to a Freedom of Information (FOI) request by wealth manager Quilter.
In the 2023/24 tax year, 75 penalties for 'Failure to Notify' were issued, down from 7,007 the year before. The total value of the penalties fell from £4.5million to £45,443.
With just 46 penalties issued so far in 2024/25, Quilter suggests that last year's fall was not a one-off.
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.'
HMRC itself noted in its FOI response that it had focused efforts on raising awareness of the high income child benefit charge (HICBC).
Since its introduction a decade ago, the HICBC has come under fire for placing an extra burden on working parents, particularly single parents.
A household with two parents each earning £59,000 - a total of £118,000 - will receive child benefit in full, while a household with a sole parent earning £60,000 would see some or all of the benefit withdrawn.
Hunt had pledged to significantly reform the charge and consult to move to a system based on a household, rather than individual income by 2026.
However, the Government quietly shelved the plans and will no longer proceed with the HICBC reforms.
Instead, it has pledged to reduce the administrative burden for families by allowing those affected to repay the charge via PAYE from this summer, rather than completing a tax return.
Tomlinson adds: '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.'