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Child benefit changes

Kids | Saving for Children

By Justin Modray, published 04 October 2010.
Helpful? 8

The Government has announced that child benefit is to be axed for higher rate taxpayers from 2013.

Will I be affected?

If you’re currently claiming child benefit and either you or your spouse is a higher rate taxpayer then as things stand you’ll no longer receive this from April 2013.

When does higher rate tax kick-in?

If you’re under 65 then higher rate tax is currently charged on income above £43,875. This is calculated by adding your basic rate tax allowance of £37,400 to your personal income tax allowance of £6,475.

How much is child benefit?

It’s currently £20.30 per week (£1,055 p.a.) for the first child and £13.40 per week (£697 p.a.) for subsequent children. These rates were frozen until April 2014 in June’s emergency Budget.

Are child tax credits affected?

No, but they are due to be reduced from April 2011 for families with a combined income of around £30,000 or more. See this article for more details.

Is this fair?

Given the Government has to slash spending (see this article for more details on why) then axing child benefit for higher rate taxpayers is probably one of the less contentious cuts. It does seem unfair that it’s based on just one parent being a higher rate taxpayer rather than combined family income – i.e. if one parent earns £50,000 and the other £0 child benefit won’t be paid, whereas a family where both parents earn £40,000 will continue to receive it despite having a higher overall combined income – but wielding the axe in this way does at least keep things simple.

Can we expect further cuts?

Yes. The extent of the Government’s financial predicament cannot be underestimated, especially as it’s banking on growth in the private sector to compensate for a shrinking public sector. If the private sector struggles to create new jobs (and there’s a fair chance it will) then soaring unemployment will make balancing the Government’s books even more difficult than it already is. The next few years could be bleak, very bleak indeed.

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