Under the Pay As You Earn (PAYE) system, income tax and National Insurance contributions are usually deducted automatically by your employer before you are paid.

Typically:
• Your employer applies a PAYE tax code issued by HMRC
• Income tax is deducted from your salary or wages each pay period
• National Insurance contributions are deducted alongside tax
• The amounts deducted are paid to HMRC on your behalf
• You receive your net pay after deductions

For many individuals, PAYE settles their tax position automatically — provided the tax code is correct and all taxable income is taken into account.

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When PAYE May Not Fully Settle Your Tax Position

PAYE may not be sufficient where your circumstances change or you have additional sources of income. This commonly applies where you have:

• More than one job or pension
• Benefits in kind (such as a company car or medical insurance)
• Employment expenses not fully covered through PAYE
• Rental, investment, or other untaxed income
• Changes in employment during the tax year
• Underpaid or overpaid tax identified by HMRC

In these cases, additional reporting or a Self Assessment tax return may be required.

High Income Child Benefit Charge (HICBC)

Individuals who receive Child Benefit — or whose partner receives it — may be subject to the High Income Child Benefit Charge if their income exceeds certain thresholds. This often affects individuals taxed under PAYE who may not realise they have an additional tax obligation.

How the Charge Works

The High Income Child Benefit Charge applies where:
• You or your partner receive Child Benefit
• Your adjusted net income exceeds £50,000
• You or your partner is the higher earner

The charge:
• Starts once income exceeds £50,000
• Increases gradually as income rises
• Results in the full Child Benefit being repaid when income reaches £60,000

Even if Child Benefit is paid to one partner, the charge applies to the higher-income individual, regardless of who receives the payments.

Why PAYE Taxpayers Are Often Affected

PAYE does not automatically collect the High Income Child Benefit Charge. As a result:
• A Self Assessment tax return is often required
• Unexpected tax bills can arise
• Penalties may apply if the charge is not declared
• Individuals may miss opportunities to stop or adjust Child Benefit claims

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