Child benefit changes: Parents will need to take action if they wish to receive what that they are entitled to

Rachel McEleney, associate tax director at Deloitte, comments on today’s Budget:

“The income threshold at which child benefit begins to be clawed back via the High Income Child Benefit Charge will be increased from £50,000 to £60,000 from 6 April 2024. The upper threshold at which it is clawed back entirely will be increased from £60,000 to £80,000. If a couple lives together, it is the higher earner whose income is currently considered. As well as restoring the full benefit to those earning less than the new threshold, today’s changes mean that those earning between £60,000 and £80,000 will now retain some of their child benefit. For someone earning £70,000 who has two children, this means that the net benefit after clawback in 2024/25 will be £1,106.30 rather than nil.

“The threshold was originally set at £50,000 in 2012/13 and has remained frozen at that level since. At the time, this threshold was well above the income tax higher rate threshold and affected about a million families. As incomes have increased with inflation, the number of families affected has grown significantly over time, with roughly 2.5 million families expected to be affected in the current tax year. Had the threshold increased by Consumer Prices Index it would be just over £70,000 in 2024/25. Today’s increase does not fully address the discrepancy, but it will nevertheless be a welcome development that is expected to benefit half a million families.

“Parents with income of less than £80,000 who are not receiving child benefit, whether due to not claiming it or electing for the payments to stop, will need to take action if they wish to receive the amounts that they are entitled to. 

“The Chancellor also announced that he plans to consult on changing the basis for the charge from the higher earner’s income to the household income. This would remove some of the issues that arise currently where one parent earning £60,000 loses all of their benefit, whilst two parents earning £50,000 each lose none. This change is intended to be implemented from April 2026.”

Ends

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