Home / Business and Economy / Thousands Face Child Benefit Clawback Due To Tax Freeze
Thousands Face Child Benefit Clawback Due To Tax Freeze
6 Jan
Summary
- Tens of thousands of families to repay child benefit due to frozen tax thresholds.
- High income child benefit charge applies to households with incomes over £60,000.
- Salary sacrifice is a popular method to avoid losing child benefit payments.
Tens of thousands more families are set to be drawn into the high income child benefit charge over the next three years. This is due to frozen tax thresholds, a phenomenon known as fiscal drag, where wages rise but tax points remain static. The charge requires households with the highest earner above £60,000 to repay some or all of their child benefit.
His Majesty's Revenue & Customs forecasts indicate a significant increase in liable families, from 324,000 in 2025-26 to 359,000 by 2028-29. Most of these newly affected families will fall within the £60,000 to £80,000 income bracket, where benefit is repaid partially. Those earning over £80,000 must repay the entire amount.
To navigate these changes, many families are exploring options like salary sacrifice to reduce their taxable income on paper. This allows them to divert funds, for instance, into pension contributions. The government had previously pledged to reform the charge to a household-based system, but these plans were shelved.
