30 October 2024
If you are covering the confirmation in the budget that Labour will not proceed with the reform to base the High Income Child Benefit Charge on household incomes, please see comments below from Rachael Griffin, tax and financial planning expert at Quilter:
"The outgoing Conservative government had pledged to address the unfairness in the child benefit system, where dual-income households just under the cap can still receive full benefits, while single-earner households slightly above the threshold face reductions or loss of support. This disparity could have been tackled by pegging child benefit eligibility to household income under £120,000, rather than individual earners, which is inherently unfair for many high single-earning households. The previously proposed reforms would have benefited 700,000 families by an average of £1,500.
“Labour had remained silent on whether it would continue this work until today’s budget, which confirms it will not take this reform forward. Labour will, however, make it easier for taxpayers to manage their higher income tax charge by allowing employed individuals to pay it via their tax code from next year, while also pre-populating self-assessment returns.
“Seeing through this reform, while complex, would have better reflected the financial realities of modern families, ensuring those most in need are not unfairly penalised. The inherent unfairness in this complex system, where a single £60,000 earner starts to lose their child benefit while a household earning nearly £120,000, split between two earners, keeps it all, will therefore remain a focus for campaigners and consumers alike.
“Parents often don’t realise that they can receive much more in Child Benefit payments by upping their pension contributions to reduce their income, which also allows them to take advantage of the favourable tax relief available on pensions. Although this does mean that someone has to increase how much they are saving for retirement, the benefits mean that the ultimate gain far outstrips the spend."
