Warning for thousands of parents set to lose child benefit under Budget stealth tax
THOUSANDS of parents are set to lose thousands of pounds due to child benefit charges.
In the latest Spring Budget, Chancellor Jeremy Hunt did not increase the rate that parents pay child benefit charges.
It means that thousands more parents will lose out on child benefit payments.
Figures from the Institute for Fiscal Studies (IFS) at the time suggest roughly 200,000 families will go over the £50,000 threshold in the 2023-24 tax year.
You have to pay the high income child benefit charge if you or your partner has an individual income over £50,000.
For every £100 above the threshold parents see 1% knocked off their child benefit payments.
They lose it completely when one parent’s salary hits £60,000 a year.
The cap was introduced in 2013 by the then Chancellor George Osborne, and affected one in eight families at the time.
But while the threshold has not changed since the rules were first introduced in 2013, wages have risen due to inflation.
That means hundreds of thousands of families will be dragged into paying back some of their child benefit.
A stealth tax is a form a tax collected in a way that isn’t obvious.
While the government doesn’t change the headline rate, you end up paying more money.
What is the high income child benefit charge?
Child benefit is given to families bringing up a child under 16 or under 20 if they’re in “approved” education or training.
There’s no limit to how many children you can claim for.
The benefit is worth £21.80 a week for your eldest or only child, then £14.45 per child for any additional children.
However, if you or your partner individually earn over £50,000 you have to start paying back some of your child benefit.
If your income is between £50,000 and £60,000 the charge is 1% of your child benefit for every £100 between those two figures.
If your income goes over £60,000 all your child benefit is taken away.
This means couples can have a combined income of up to £100,000 without having their child benefit deducted.
The benefit amount can be passed on to family members who look after your children.
But that parent has to be claiming child benefit already.
If your income is over the threshold, you can choose to still get payments and pay any tax charges to HMRC at the end of each tax year.
Or, you can opt out of getting payments and not pay the tax charge.
Parents have to notify HMRC if they are liable for the charge and they must file a self-assessment tax return to pay it.
Charity Turn2Us suggests using the government’s child benefit tax calculator to see how you could be affected by the high income tax charge.
What else did Jeremy Hunt announce?
Spring Budget at a glance
- Millions of households will save £160 after the Energy Price guarantee was extended
- Cigarette prices will rise after the government hiked tobacco tax
- Drivers won’t pay more for fuel as duty was frozen and a 5p cut will continue in a huge win for The Sun’s campaign to keep it low
- The lifetime allowance on pensions will be axed and the annual allowance will increase
- The government will give councils £500m to fix potholes
- Millions of energy customers on prepayment meters will no longer pay more
- Jeremy Hunt unveiled 12 low-tax investment zones across the country
- Alcohol duty on beer in pubs will be cut, saving 11p per pint – but tax on wine and spirits will increase
- The Chancellor confirmed that benefits will rise next month
- Corporation tax will rise to 25% next month
- The government will extend free childcare to 30 hours for one and two-year-olds
- Working parents on Universal Credit will get more for childcare and costs covered straight away
If you aren’t sure how the announcements in the Budget may affect you, we’ve created a handy tool that will provide more information.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk