Taxman could take back a year's child benefit in two months Parents can call the tax office to stop the process, but only if they realise it has begun. And many may not. The demand is not explicit with the letters headed as a "PAYE Coding Notice." This is because the money is reclaimed by adjusting your tax code to reduce the tax-free amount you can earn this year. This tax-free allowance should be £9,440. Once you admit to the taxman you are no longer eligible for child benefit but still receiving it, your tax-free allowance is reduced by £4,381 to just over £5,000. But because the end of the current tax year, in April, is so close, workers could find their next two pay packets are substantially smaller than normal. In effect, the taxman claws back the £1,752 owed for a two-child family over just two months, reducing pay by £876 for each of the two or three months' pay before the end of the tax year on April 5. In extreme cases, salaries could be more than halved. Someone earning £60,000 would normally receive take home pay of around £3,200 a month, after paying into a pension. If they have four children, they would owe around £3,250. Repayment of that would reduce their take home pay to around £1,550 for those two months. Officials say the rules do allow parents to opt to repay the money in next year's self-assessment form rather than via this year's tax code. One member of HMRC call centre staff said that a box must be ticked during the online self-assessment process but that "it may not have been that obvious." Those receiving PAYE Coding Notices are urged to call the tax office on 0300 200 3300. What has changed with self-assessment and who owes money? Around 1.1 million parents lost entitlement to child benefit a year ago but around 350,000 continued to receive the payments and need to repay the money via self-assessment. An estimated 100,000 owing child benefit have done nothing. It was withdrawn from any household with an earner on more than £60,000. Those earning between £50,000 and £60,000 see it gradually withdrawn. To work out what is owed, use the calculator at www.gov.uk/child-benefit-tax-calculator To replace that income, a pay rise of more than £4,000 would be needed, after higher - rate tax. Those who owed money should have registered for self-assessment by October 5. The penalty for failing to do so is up to 100pc of any money owed. Then a paper form should have been completed by October 31 - extended to January 31 for those willing to do it online. But to file online you need a government Gateway login. The set up takes up to 10 days so the deadline for this was January 21. You also need a Unique Taxpayer Reference (UTR). This can take six to eight weeks. Missing the January 31 deadline triggers a £100 fine. Interest could also be owed. But those registering before the deadline on Friday will be given three months to file a return and may escape the fines. Nimesh Shah, senior manager at accountants Blick Rothenberg, said: "If HMRC issue a "notice to complete a tax return" today (29th January), you have until 28th April to file your tax return. If you file by the date shown on the notice, HMRC shouldn't charge the automatic £100 penalty, as the normal 31st January deadline is overridden. But penalties could still apply in some circumstances. Mr Shah said: "The amount of the penalty HMRC could charge is based on the behaviour of the taxpayer, and whether the late registration has been prompted or unprompted. The penalty rates could be up to 100pc of the tax but this is rare. Failing to notify HMRC in time for the child benefit charge is likely to result in a penalty of up to 30%, but it could be nothing. Tax experts are urging people to call HMRC before Friday and offer a payment even if they are not registered, again reducing the chance of a penalty. This can be done with just your National Insurance number. TAX TIP: Anyone filling in a self-assessment form can reduce their tax bill by declaring any donation via Gift Aid - or any money they have put into a pension, other than through their payroll. Read a full guide here