6 March 2024
If you are covering the Child Benefit changes announced at the Chancellor’s spring budget, please see the following comment from Shaun Moore, tax and financial planning expert at Quilter:
"The cost of living in the UK has surged notably since the high-income Child Benefit threshold was created in 2013, and the current ‘high income cap’ of £50,000 has ensnared even some basic-rate taxpayers. It is therefore positive that the Chancellor has announced the threshold will rise to £60,000, and the Child Benefit taper level has been increased from £60,000 to £80,000.
“Using the Bank of England's inflation calculator this threshold should be £66,727 today, so though this increase is welcome, it still somewhat overlooks the impact of inflation over the past decade. Increasing the threshold is a step in the right direction, and we are pleased to hear that the government will fundamentally reevaluate how household income is considered in the eligibility criteria for Child Benefit to reduce unfairness baked into the system.
"We have long since called for the government to take a more equitable approach by pegging the eligibility for full Child Benefit to a household income of £100,000, rather than focusing on the earnings of a single earner. The government has today committed to consulting on moving to a system based on household rather than individual incomes. This would address the glaring inequity where a dual-income household with each partner earning just under the HICBC threshold can access full Child Benefit and do not face any reduction in benefits, while in stark contrast, a single parent earning slightly over the threshold faces a reduction or total loss of this support after they earn more than the taper level, despite managing on a significantly lower household income.
“While this would introduce more complexity for HMRC into the Child Benefit system, the benefits of rectifying the current system’s unfairness far outweigh these challenges. This approach would not only eliminate the ‘benefit cliff edge' effect for single earners just above the current threshold but would also ensure the policy more accurately reflects the financial realities of modern families, including dual-income households and the rising costs of childcare.
"Such a change will support families equitably and efficiently, encouraging career progression without the fear of losing essential financial assistance and better aligning with the economic and social shifts in family structures. However, the government’s 2026 implementation target will leave families facing this same issue for some time yet.”
