500,000 families to lose some of their child benefit

ALMOST half a million working families will have some of their child benefit clawed back in the next four years, exclusive research suggests.

When introduced in 2013, the child benefit cap was designed to impact only the wealthiest families.

In households where one parent or guardian earns over £50,000 a year, they are required to pay back some or all of their child benefit.

Where one parent earns at least £60,000, the family must pay it all back. Over the years, rising numbers of less well-off families have been caught by the £50,000 cap as it has not increased in line with wage inflation.

Had it done so, it would now be worth more than £60,000.

Research from wealth platform Interactive Investor reveals that a further 478,000 families will start to lose the benefit over the next four years. A parent earning £43,500 today would be on £50,000 by 2026 if they benefit from average wage growth.

Child benefit is designed to help with the cost of bringing up children and is currently worth almost £1,200 a year for the first child and £728 for every subsequent child.

It is due to increase by 3.1 per cent in April.

Myron Jobson, personal finance campaigner at Interactive Investor,

says: ‘It is shameful that the £50,000 earnings cap hasn’t risen in line with inflation.

‘Many parents earning around that figure would say that they don’t feel particularly wealthy, especially given the rise in the cost of living, which has put extra pressure on household budgets.’

Jobson adds that the current rules are baffling because the benefit cap kicks in when one parent earns above £50,000.

Yet two parents could earn £49,000 each, giving a household income of £98,000, but they would keep all of their child benefit.

Families receive the benefit regardless of their income.

They must then notify Revenue & Customs if they need to repay some – which can be done via a tax return.

Those who fail to notify can receive fines of up to 30 per cent on top of what they owe.