Tax experts are sending out a warning to millions of parents as HM Revenue and Customs (HMRC) rules are losing families hundreds of much-needed pounds.
Parents with incomes falling between £60,000 and £80,000 are being advised to review whether they owe repayments on their Child Benefit through the High Income Child Benefit Charge.
The charge applies when either parent or partner receiving Child Benefit has an adjusted net income exceeding £60,000, following a threshold increase from the 2024-25 tax year.
Andy Wood, a tax expert at Tax Barrister UK, said: “Many families do not realise that Child Benefit can become repayable once one parent or partner earns over £60,000.”
Britons are being warned about HMRC rules in relation to Child Benefit
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He noted the charge operates on individual rather than household earnings, meaning a single earner on £65,000 faces liability while a couple each earning £59,000 may not.
The repayment mechanism requires parents to return one per cent of their Child Benefit for each £200 their adjusted net income surpasses the £60,000 threshold.
To illustrate, an individual with adjusted net income of £67,600 sits £7,600 above the limit. Dividing this excess by £200 produces 38, meaning 38 per cent of their Child Benefit must be repaid. Once earnings reach £80,000, the full amount becomes repayable.
Mr Wood explained: “The charge is based on individual income rather than household income, which can catch people out. A couple earning £59,000 each may not face the charge, while a household with one earner on £65,000 could.”
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Adjusted net income represents the crucial figure for determining liability, and it does not necessarily match a person’s salary.
The tax expert added: “The key figure parents need to understand is adjusted net income. This is not always the same as salary, as it can include things like savings interest, dividends and other taxable income.”
Additional taxable income streams such as dividends and interest from savings accounts, can push earners over the threshold unexpectedly.
However, families may be able to lower their adjusted net income through pension contributions and charitable donations made via Gift Aid.
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The tax specialist advised parents to complete the full calculation before concluding that they exceed the limit. Despite the repayment requirement, opting out of Child Benefit entirely may not always serve families best, he calims.
Mr Wood shared : “A lot of people assume Child Benefit should simply be cancelled once they cross the threshold, but that is not always the best option.”
He explained that maintaining the claim while paying back the charge can safeguard National Insurance credits and protect future State Pension entitlement.
The charge also extends to situations where another person claims Child Benefit for a child residing with you, provided they contribute equally to the child’s upkeep. When both partners exceed the threshold, responsibility for the charge falls to the higher earner.