An additional 35,000 British households are set to lose their full Child Benefit entitlement over the next three years, as a controversial tax charge continues to expand its reach.
The Growing Reach of the High Income Child Benefit Charge
New analysis from financial advisers Quilter reveals a significant surge in the number of families affected by the High Income Child Benefit Charge (HICBC). The figures project an increase from 324,000 to 359,000 households by the 2027/28 tax year, meaning another 35,000 families will be pulled into the net.
The mechanism behind this expansion is the ongoing freeze on income tax thresholds, combined with rising wages. As salaries increase but the point at which the charge applies remains static, more people find themselves crossing the eligibility limit. For a household with one child, this translates to a loss of the full annual entitlement of £1,355.
‘Frozen Thresholds Let Inflation Do the Work’
Tax and financial planning experts have issued stark warnings about the impact of these fiscal policies. Shaun Moore, a tax and financial planning expert at Quilter, stated: "Frozen thresholds let inflation do the work of tax increases."
This phenomenon, often described as 'fiscal drag', means the government raises tax revenue without officially increasing tax rates, by allowing inflation and wage growth to push more earners into higher tax brackets or benefit withdrawal zones.
Government Response and Support Alternatives
A Government spokesperson defended the policy, stating: "The high income child benefit charge helps to ensure the sustainability of the public finances and protect and fund our vital public services."
The spokesperson also highlighted other forms of support for families, including the expansion of government-funded childcare, the creation of 3,000 new and expanded nurseries in primary schools, and the rollout of free breakfast clubs.
For those affected, HMRC outlines two main choices:
- Continue to receive Child Benefit payments and pay the tax charge through Self Assessment.
- Opt out of receiving the payments entirely and therefore not pay the charge.
It is crucial to note that if you are required to complete a Self Assessment tax return for another reason—such as becoming self-employed—you must declare and pay the HICBC through this system. The deadline for payment is typically 31 January following the end of the relevant tax year. For instance, for the tax year starting on 6 April 2025, the payment deadline would be 31 January 2027.
