Parents face child benefit crackdown in ‘stealth tax’ on the middle class

More than a million parents face being caught in a child benefit crackdown with the tax authority expected to step up its punishment of higher earners.

Families have been warned they must hand back either all or some of their benefit, if they have started to earn more than the £50,000 means-test threshold for the handout. Workers risk severe fines for failing to comply.

Child benefit is worth some £2,000 a year for a family with two children. However, since 2013, parents who earn more than £50,000 have had to repay some or all of the benefit, known as the “High Income Child Benefit Tax Charge”.

The tax office became more lenient on its policing of the charge during the pandemic, however, parents now face a fresh wave of scrutiny, experts have warned. 

The number of HM Revenue & Customs probes into parents dropped by more than half last year to around 45,000, down from 126,000 the prior year. This was because tax office staff focused on rolling out state support schemes such as furlough.

However, Sean McCann of advisers NFU Mutual said HMRC was likely to redouble its efforts to sniff out those claiming child benefit when they were not eligible or were paying back incorrect amounts.

He said: “Families who didn’t receive reminder letters last year shouldn’t assume tax isn’t owed. If you or your partner earn more than £50,000 and receive child benefit, you may need to repay it.”

Some 1.6 million people will be liable for the charge this year, as wage growth takes earnings above the £50,000 threshold, which has remained frozen since 2013, according to the Institute for Fiscal Studies, a think tank (see chart). 

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