Parents hit hard by the cost-of-living crisis and soaring childcare costs say Jeremy Hunt’s reforms to child benefit payback thresholds will not come soon enough.
On Wednesday, the Chancellor raised the income level threshold at which people have to start paying child benefit from £50,000 to £60,000.
It means that those who earn a salary of more than £60,000 a year will have their child benefit payments cut down via the tax system on a sliding scale until it is completely withdrawn for those earning over £80,000.
Child benefit is not means-tested, and the charge is the Treasury’s way of reducing the amount of benefit paid to higher earners.
The rule has been criticised as being unfair because it failed to take into account if a household had multiple incomes that did not meet the threshold for paying the benefit back. This means a single a parent or lone earner paid £61,000 would have to repay some child benefit but a couple who earn £59,000 each, bringing the household income to over £100,000, would not.
The Chancellor vowed to address this by consulting on moving the system to household-based – but the change will not go ahead until April 2026.
How child benefit works
Child benefit is paid for children under the age of 16, or up until the age of 20 if they are still in full-time education or training.
Parents get £24 a week for their first child and £15.90 a week for any children after that, meaning it is worth £2,074.80 a year for a family with two children. These payments are due to rise to £25.60 and £16.95 a week in April.
Currently, they need to pay back 1 per cent of the benefit for every £100 of their income over £50,000. Then at £60,000, the benefit is stopped.
The thresholds had not been raised since they introduced in 2013, despite the cost of living crisis and childcare costs having soared in recent years.
Emily Saunders is a single mother earning £65,000 and says single parents “need the system fixed now” rather than in two years’ time.
“I’ll now be entitled to claim child benefit, but will have to pay some of it back,” the self-employed accountant from Manchester told i. “But if a two-parent household earn £59,000 each, bringing their household income to £118,000, they won’t have to pay any of it back.
“We’re still in a cost-of-living crisis and two years is a long time to wait for this to be addressed.”
Mr Hunt says nearly 500,000 families will be better off by an average of £1,260 in 2024-25 as a result of the reforms.
Mother-of-two Sam Kennedy Christian estimates her family will have around £1,300 extra a year because of the changes. With a five-year-old and one-year-old, she works part-time earning £17,000 a year, while her husband brings in between £50,000 to £60,000.
They have been claiming the tax, some years pay back nearly all of it, but the changes will probably mean they get to keep all of it.
“We have been keeping the child benefit in a separate bank account to make sure we had it there should we need to pay it back,” Mrs Kennedy-Christian, a parent coach from Kent told i. “I’m pleased to see the threshold raised, although it’s not a complete fix. It is good for is, but overall it’s still overly complicated.
“I’m disappointed about how long they’re going to spend on sorting out the household income element. This is where the real unfairness lies.
“There are other families bringing in significantly more than us who are not having to pay it back.”
Families opting out to avoid charge
Mother-of-two Zoe Whitman earns about £70,000 a year as a business coach, so her family hasn’t qualified for child benefit. Her husband Olly isn’t currently earning, as he has just started out in self-employment. Following the announcement the threshold will be raised, she says she will now apply for the payment.
However, she told i that she finds the “admin” of claiming the benefit and having to pay it back a headache.
“I think a lot of families are put off by the fact one person claims it and the other has to pay it back, figuring out how much they need to put aside for that.”
Indeed, as of August 2022, more than 680,000 families had opted out of receiving child benefit to avoid being penalised.
Money Saving Expert founder Martin Lewis has said he is “very, very pleased” with Jeremy Hunt’s Budget reforms to the child benefit system.
Do you have a real life story? Email claudia.tanner@inews.co.uk.
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