An estimated 35,000 additional British families will be required to repay some or all of their Child Benefit over the next three years, according to new projections. This significant increase is a direct consequence of frozen income tax thresholds, a policy often described as a 'stealth tax', which is pulling more households into the scope of the High Income Child Benefit Charge (HICBC).
The Mechanics of the High Income Child Benefit Charge
The HICBC is a tax charge that applies when the highest earner in a household has an adjusted net income exceeding £60,000. The calculation for this income figure is broader than just salary; it includes savings interest, dividends, and property income, which can catch many families unaware.
The repayment works on a sliding scale. For every £200 of income earned above the £60,000 threshold, 1% of the Child Benefit received must be repaid. This means the benefit is fully clawed back once an individual's income reaches £80,000 or more. Many families only discover they are liable when they receive an unexpected letter from HM Revenue and Customs (HMRC).
Why Thousands More Are Being Affected
The primary driver behind the projected rise to 359,000 affected families by the 2028-29 tax year is the government's decision to freeze personal tax allowances and thresholds until 2028. While wages may increase nominally due to inflation or promotions, the point at which the HICBC kicks in remains static.
Consequently, more people are being pulled over the £60,000 limit even if their real-terms purchasing power has not improved. This 'fiscal drag' effect is a key reason why the number of families facing this charge is set to grow substantially.
Legitimate Ways to Reduce Your Liability
There are several approved strategies families can use to lower their adjusted net income and potentially avoid or reduce the HICBC. The most common methods involve making contributions that are deducted from gross income:
- Increasing pension contributions through your workplace scheme or a personal pension.
- Making donations to charity under the Gift Aid scheme.
Alternatively, families can choose to opt out of receiving Child Benefit payments while still completing the claim form. This crucial step ensures the lower-earning parent, often the mother, continues to receive National Insurance credits that protect their future State Pension entitlement.
The impending increase highlights the growing impact of threshold freezes on middle-income families. Experts urge those approaching the £60,000 income mark to proactively assess their adjusted net income and consider their options to avoid an unforeseen tax bill from HMRC.
