Child benefit is paid to the parents and guardians of children up to age 16, and children aged 16 to 19, if they stay in approved full-time education or training. It is £24 a week for the eldest child and £15.90 a week for each younger child.

The ‘high income child benefit tax charge’ was introduced in 2013 and affects families where one parent earns more than £50,000 a year.

Those with income over this figure are required to pay 1% income tax on the child benefit for each £100 of income above this. This means the value of child benefit is eroded to nil once the taxable income of one of the adults exceeds £60,000.

Wage increases over the years mean that more families are hitting the £50,000 limit where their child benefit starts to be stripped away. It also means many more families are reaching the £60,000 limit where they lose the benefit entirely.

Fiscal drag

The high income charge was set at £50,000 in 2013 and hasn’t been increased since then – if it had increased in line with inflation it would be £65,000 today.

Critics say the tax charge has always fallen unfairly on the shoulders of single parents, because it’s based on the income of the highest earner.

This means that a single parent can have a household income of £50,000 and cross the threshold, while a couple can earn £49,999 each and still receive all their child benefit.

How many families are claiming child benefit?

According to government figures, 7.7 million families claimed child benefit for 13.2 million children by 31 August 2022. The number of families claiming is down 0.6% or 43,000 from a year earlier and is the lowest since these statistics were first produced in 2003.

About 683,000 families opted out of receiving payments – covering 1.05 million children – up 5% in a year. The total opting out has risen every year since 2013.

In 2012, 97% of eligible children were claimed for. In 2022 this hit a new low of 89%.

Laura Suter, head of personal finance at AJ Bell, said: “The figures show a huge increase in the number of people who are claiming child benefit but not receiving the actual money, which means they have hit the £60,000 threshold but still want the National Insurance credits. A total of 683,000 families opted out of getting the payments, accounting for 1.05 million children. If these families had been eligible they could have claimed £1.15bn in additional support.

“On top of that, 43,000 fewer families are claiming the child benefit altogether, when compared to the previous year. This is because they have hit the high income charge and no longer want to claim the money.”

Lockdown woes

In addition to those who aren’t claiming because of the tax charge, there are significant numbers who have fallen out of the system during the pandemic, when birth registrations were disrupted, and child benefit forms may not have been handed out in hospitals.

New parents also saw less of professionals and other parents, so missed the chance to discuss their options. It’s one reason why among children under the age of one in August 2022, only 75% of eligible children were claimed for.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “This isn’t just taking a toll now, but can have a significant impact further down the line too. If you take time away from work to look after children, you may have years where you don’t pay enough National Insurance to count towards the 35 years of contributions you need for a full state pension. If you claim child benefit, you receive NI credits that count towards your state pension until the child hits the age of 12, which will help you hit the target.

“However, some people whose partner earns more than £60,000 have opted out of child benefit altogether in order to avoid the hassle of being paid and then having to repay it. Their children are among the 11% of eligible kids who aren’t claimed for at all. It means they don’t get the credit. Instead, these parents need to make a claim but opt out of getting payments, so they still get the NI credits.”