HMRC Issues Urgent Child Benefit Warning to Thousands of UK Families
Thousands of families across the United Kingdom are facing an unexpected financial shock as they become liable for the high income child benefit charge. According to a Freedom of Information request submitted by financial advice firm NFU Mutual, an additional 54,000 households will be caught by this charge by the 2030–31 tax year.
Rising Numbers and Treasury Windfall
The data reveals a steady increase in affected families, with the total number liable expected to reach 378,000 by 2030–31. In the current tax year, approximately 324,000 families are facing the charge, but this figure is projected to grow annually as wages continue to rise across the country.
This expansion represents a significant windfall for the Treasury. HMRC is forecast to raise £2.57 billion from the charge over the next six years, with annual revenues climbing from £373 million in the current tax year to £486 million by 2030–31.
Threshold Changes and Erosion of Benefits
In 2024, the government increased the starting threshold for the charge from £50,000 to £60,000. This marked the first rise since the tax was introduced in 2013, with ministers claiming it would remove around 170,000 households from paying the charge.
However, the benefit of this threshold adjustment is being steadily eroded as incomes rise nationwide, dragging more families back into the tax net. The charge applies when the highest earner in a household has an adjusted net income exceeding £60,000.
How the Charge Works
For every £200 earned above the £60,000 threshold, families must repay 1% of their child benefit. Once income reaches £80,000, households are required to repay 100% of their child benefit, prompting many to opt out of the system entirely.
Critics have long argued that the system creates unfairness, as two-parent households where each partner earns £60,000 can keep the benefit in full, while a single-earner household with an income just over £60,000 loses some or all of their entitlement.
Widespread Lack of Awareness
Sean McCann, a chartered financial planner at NFU Mutual, warned that many families remain unaware of their potential liability. He explained that the charge applies not only to biological parents but also to situations where someone moves in with a partner who is claiming child benefit, even if the children are not their own.
"Many are still unaware of the need to inform HMRC once their income exceeds £60,000 and pay any child benefit tax charge due," Mr McCann stated. "There have been numerous cases where significant arrears have built up over several years, resulting in unexpected five figure tax bills."
He added that the responsibility falls on the individual with the highest income in the household, which can create difficulties for couples who do not typically share detailed earnings information with each other.
Mitigation Strategies Through Pensions
One effective way for families to manage the charge while enhancing their retirement savings is through increased pension contributions. The tax assessment is based on income after pension contributions are deducted.
"One way to mitigate the impact of the charge is to pay more into your pension," Mr McCann advised. "Reducing your income to £60,000 or below through pension contributions can be a very effective way of dealing with this tax."
For example, if the highest earner in a family with three children earns £70,000, they could save £3,574 annually in tax by paying £8,000 into their pension. HMRC would add £2,000 in tax relief, bringing the total pension contribution to £10,000. This would pull £10,000 of earnings out of the 40% tax band, saving £2,000, while reducing income to £60,000 would eliminate the child benefit tax charge, saving an additional £1,574.
Mr McCann also noted that charitable donations made through Gift Aid can similarly reduce income when HMRC assesses whether the charge applies, providing another potential avenue for families to manage their tax liability.
