Parents could be stripped of Child Benefit payments under HMRC eligibility rules

A man sat a kitchen table looking at bills while mum and toddler look on
-Credit: (Image: Getty Images/iStockphoto)

Parents could be stripped of their Child Benefit under little-known HMRC rules. Finance experts have warned people to be aware of the way that eligibility for the payment is worked out.

At present, under changes that came into effect in April, Child Benefit starts to be reduced when one parent earns more than £60,000, a rise on the previous £50,000. Eligibility to the benefit is removed entirely at £80,000, an increase on the previous upper limit of £60,000.

The changes mean that if you or your partner earn less than £60,000 per year, you can claim the full amount of Child Benefit - but once one of you earns over £60,000, you have to pay some of it back to HMRC under a tax called the High Income Child Benefit Charge (HICBC) - this has been halved and is now set at 1 per cent for each £200 earned over £60,000. However, there are specific rules to bear in mind on how income is calculated.


Tax expert Andy Wood has clarified the eligibility of Child Benefit and its recent changes, including how parents may be financially affected. He explained: "The threshold for Child Benefit eligibility currently stands at £80,000 but it's important to note that this figure includes the value of certain work benefits.

"When considering eligibility for Child Benefit, it's important to understand that the calculation extends beyond basic salary. For instance, a parent earning below the cap may find themselves ineligible if the value of their benefits, such as a company car or fuel allowance, goes over the threshold.

"An individual's adjusted gross income for Child Benefit purposes involves various income sources, including gross salary, other employment income, taxable benefits, pensions income, self-employment profits, and investment income.

"Deductions can be made for certain expenses, such as pension contributions, tax-deductible business expenses, and costs related to schemes like the cycle-to-work scheme. These deductions play a key role in determining the final adjusted gross income for Child Benefit purposes."

How much is Child Benefit?

People may be eligible for Child Benefit if they are responsible for a child under 16 and live in the UK. Figures show 6.91 million families are in receipt of Child Benefit, which is now at an increased weekly rate of £25.60 for an eldest or only child and £16.95 per child for additional children.

Families now receive up to £1,331 a year – an annual increase of £83.20 - for one child and up to £881 a year per additional child – an annual increase of £54.60. There is no limit to how many children families can claim for.

Guidance on GOV.UK says: "Raising the HICBC threshold will ensure the charge continues to withdraw Child Benefit from high-income families as it was designed to do, by gradually withdrawing Child Benefit from individuals who have an adjusted net income in excess of £60,000, and fully withdrawing Child Benefit from individuals who have an adjusted net income of £80,000 or higher, without unfairly penalising those on middle incomes.

"By halving the rate at which HICBC withdraws the Child Benefit gain, the government is improving people's incentives to continue working or take up more hours."

What to do if your Child Benefit is hit by tax charges

GOV.UK guidance explains: "Families have two options regarding Child Benefit. One option is to claim Child Benefit and receive payments, paying any HICBC due at the end of each tax year through Self Assessment. The other option is to claim Child Benefit but choose not to receive payments, and therefore not have to pay HICBC. This is known as opting out. However, individuals must pay any tax owed for each tax year up to the date they or their partner opt out of receiving Child Benefit payments.

"New claims to Child Benefit are automatically backdated by three months, or to the child's date of birth (whichever is later). For Child Benefit claims made after April 6, 2024, backdated payments will be treated for HICBC purposes as if the entitlement fell in the 2024 to 2025 tax year if the backdating would otherwise create an HICBC liability in the 2023 to 2024 tax year."

Tax expert Andy Wood added: "It's worth noting that over the first 16 years of a child's life, HMRC may provide parents with more than £17,000 in Child Benefit payments if their income falls below the £80,000 cap.

"The recent changes in Child Benefit thresholds signify a concerted effort to align support with evolving economic realities. With the lower threshold raised to £60,000 and the upper threshold extended to £80,000, a broader spectrum of families can access financial assistance.

"The policy of fully withdrawing Child Benefits for individuals earning over £80,000, where some parents may need to repay a portion due to the High Income Child Benefit Charge, prioritises individual income over household earnings. This approach ensures a precise assessment of eligibility, channelling resources effectively to those who require support."

The Conservatives have promised to double the Child Benefit income threshold to £120,000 if they win the General Election, which they say will amount to an average annual saving of £1,500 for families who will no longer have to repay some of the allowance.

Get breaking news on BirminghamLive WhatsApp. Join our dedicated community to get the latest updates. You can find out more in our Money Saving Newsletter which is sent out daily with all the updates you need to know on benefits, pensions, finances, bills, and shopping discounts.