New analysis reveals that tens of thousands more British families will be forced to repay child benefit over the coming years, as frozen tax thresholds pull more households into a higher tax net.
The Stealth Tax Impact on Family Finances
Official forecasts from HM Revenue and Customs (HMRC), obtained through a Freedom of Information request by wealth manager Quilter, show a significant rise in the number of families liable for the High Income Child Benefit Charge (HICBC).
The data predicts that 35,000 additional families will be dragged into paying the charge between the 2025-26 and 2028-29 tax years. The total is expected to jump from 324,000 to 359,000.
This surge is a direct consequence of Chancellor Rachel Reeves' decision in the Autumn Budget to extend the freeze on income tax thresholds until 2031. The policy, designed to raise £11 billion by the end of the parliament, acts as a "stealth tax" because inflation and wage growth push people into higher tax brackets without any change in the actual threshold levels.
Who Will Be Affected and How Much They'll Lose
The families impacted are primarily working parents whose earnings fall within a specific tapering range. This affects individuals with an adjusted net income between £60,000 and £80,000, who must repay a proportion of their Child Benefit rather than the full amount.
HMRC estimates that the number of families in this partial repayment bracket will rise from 213,000 in 2025-26 to 246,000 by April 2029. Furthermore, over 111,000 families will find themselves repaying their benefit in full because their income exceeds £80,000.
"Tens of thousands more families will be pulled into the High Income Child Benefit Charge over the coming years purely because frozen thresholds let inflation and nominal earnings shifts do the work of tax increases," said Shaun Moore, tax and financial planning expert at Quilter.
"Families may not be better off in real terms, but more and more of them will see support withdrawn as a result. The data shows that each successive year more parents will be subject to clawbacks of Child Benefit that eat into household budgets at a time when costs of living remain high."
Policy Blind Spots and Future Financial Cliffs
A concerning gap in government data limits the understanding of this policy's full impact. HMRC does not hold information on how many taxpayers earning over £100,000 have children. This lack of data hampers policymakers' ability to assess how threshold freezes affect family finances comprehensively.
The £100,000 mark is a critical cliff edge, as it triggers the loss of access to 30 hours of free childcare for a household, regardless of a partner's income. This often leads to higher earners using salary sacrifice schemes, like increased pension contributions, to reduce their taxable income below the threshold.
However, a significant change is coming. From April 2029, a £2,000 annual tax-free cap on pension advice will be introduced. Any contributions beyond this will be subject to standard National Insurance rates, potentially reducing the effectiveness of this planning strategy for some.
Moore warned of the dangers of this knowledge gap: "It is also worrying that HMRC cannot say how many higher earners have children, because it means the Government lacks full visibility of who faces these financial cliff edges. As more families cross into higher income brackets in name alone, policymakers are effectively taking a shot in the dark on a key piece of family finances."
The combined effect of frozen thresholds and complex benefit withdrawal systems continues to increase the tax burden on middle-income families, creating difficult financial planning decisions for parents across the UK.
