Child benefit is quietly being clawed back from a growing number of working families as frozen tax thresholds and uneven incomes push parents into unexpected charges.
Father-of-two Paul Gillooly said he only realised he was affected after a strong year at his company Dot Dot Loans tipped him over the limit.
For the 38-year-old, from London, child benefit was never something he actively thought about.
Like many parents, he signed up when his children were small and then moved on, assuming it was a fixed part of the financial landscape rather than something that could suddenly be taken away.
That assumption unravelled when a routine conversation with his accountant revealed that a strong year had quietly pushed his income over the threshold, triggering a charge he had little knowledge of.
Speaking to The i Paper, he said: “When I realised I’d be affected, I realised fairly late, when my accountant flagged that my profits had crept over the threshold.
“It was a shock more than anything, a real ‘hang on, how did this happen?’ moment and it felt frustrating to discover I was effectively being penalised for having a good year after a lot of hard work.”
Paul is now amongst a fast-growing group of parents caught by the high-income child benefit charge, a policy that reduces child benefit once an individual’s income exceeds £60,000 and removes it entirely by £80,000.
Although the lower threshold was raised from £50,000 in April 2024, HMRC projections show that fiscal drag will still pull tens of thousands more families into the charge over the coming years as earnings rise but tax thresholds remain frozen.
For the current tax year, the cash boost pays £26.05 per week for your eldest or only child and £17.25 per week for each additional child.
That works out to £1,354.6 per year for one child and £897 per year for each additional child at those 2025/26 rates.
According to new data by wealth management firm Quilter, obtained under the Freedom of Information Act, the number of families liable for the charge will rise from 324,000 in 2025/26 to 359,000 in 2028/29.
The request also revealed that HMRC doesn’t hold data on how many taxpayers earning about £100,000 have children.
Once one member of a household with children earns over £100,000, they lose access to the tax-free childcare scheme and are no longer eligible for 30 hours of funded childcare per week during term time.
Shaun Moore, tax and financial planning expert at Quilter, said this is “worrying” because “it means the Government lacks full visibility of who faces these financial cliff edges”.
He added: “Together with the rising high-income child benefit charge caseload, this lack of data shows how fiscal drag is reshaping support for parents.
“A comprehensive review of how family benefits interact with income policy is needed so that support keeps pace with economic reality.”
This issue is particularly acute for the self-employed, whose incomes can fluctuate sharply from one year to the next.
Paul says that volatility makes it almost impossible to know where you stand until long after the tax year has ended, at which point the bill can arrive unexpectedly.
He added: “Self-employment is particularly challenging because of the irregularity of income.
“One is dormant one year, the next surprisingly strong. It’s not always clear where you will land until long after the tax year is over.
“Depending on how much over the threshold I fly, they might ask me to repay a substantial portion of that benefit – in a good year when my income is twice as high, say, most or all of it.”
That uncertainty feeds directly into family finances, he said.
Unlike childcare fees or mortgage payments, the charge doesn’t arrive as a predictable monthly outgoing, forcing families to set aside money just in case, often without knowing exactly how much they will eventually owe.
Paul said: “We haven’t suffered deprivation, but it does mean less of life’s little extras and more money anxieties. It’s unfair.”
People repay one per cent of their total child benefit for every £200 their income is over £60,000. Once your income reaches £80,000 or more, the charge is equal to the full amount of child benefit you received for the year – effectively clawing all of it back.
Paul expects to repay most or all of the child benefit, which comes to just over £2,000 for the year, via self assessment.
Child benefit is paid to millions across the country, but the number of parents facing partial or full repayment through the tax system continues to rise, figures show, often without clear warning.
Paul said greater flexibility and clearer communication would make a significant difference.
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The experience has already changed how he approached his own finances.
He said: “It has definitely made me more vigilant. I’m more conscious now about timing income and pension contributions, and how much I do or don’t reinvest rather than take personally.
“It’s also made me think more about how policy decisions can do this, often amid the silence that accompanies them.”
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