From April this year, the income threshold for child benefit charges will rise from £50,000 to £60,000, chancellor Jeremy Hunt said in today’s Spring Budget speech.
Child benefit will no longer need to be repaid in full until earnings exceed £80,000.
These changes will mean around 170,000 families no longer have to repay part of their child benefit. The Treasury calculates that this will mean a £1,260 boost on average for around half a million working families.
The chancellor also said that high income child benefit charges will be assessed on a household-basis by April 2026 and there will be a consultation on how best to do this.
Sarah Coles, head of personal finance at Hargreaves Lansdown, commented: “The child benefit rules that penalised single parents were always incredibly unfair. It’s hard enough managing a household on a single income, without the system being stacked against you, so the decision to move to a household basis is a welcome change.
“The overall threshold for couples was raised too. After a decade of being rooted to the spot, it meant far more people were dragged into repaying this benefit – so that one in eight families faced this charge. This will be welcome, but there was scope for a bigger rise. If it had risen with average wages since it was introduced in January 2023, it would be £71,774. However, today’s change is a step in the right direction, and will still make a real difference to an awful lot of families.
“Once you add the benefit repayment to income tax, it means parents earning between £50,000 and £60,000 can be effectively taxed at 60 percent. One of the most effective ways to avoid this is by making pension contributions, because these are subtracted from your income when the charge is calculated.”
Amanda Lennon, employment partner at Spencer West, said: “The 30 hours of free childcare will be extended to all children over the age of nine months, which Mr Hunt indicated will support a further 60,000 working parents.
“Having had three children in expensive early years childcare, this is great news as the 30 free hours really do help manage the cost of childcare. However, I can’t help feeling it judges parents who choose or need to return to work when their baby is younger than nine months, as I did back in 2008 so that I could maintain my career.
“I would rather see the 30 free hours applied from the point the parent actually returns to work, which would help more working parents.”
