Thousands of families can look forward to a financial boost under reforms to child benefit after a campaign by Money Saving Expert Martin Lewis forced a change of policy by the Government. You can now see exactly how the changes could affect your household with our interactive calculator.
Chancellor Jeremy Hunt used his Budget speech yesterday to announce tax reforms for child benefit payments, which will directly impact households where the highest-paid parent earns between £50,000 and £80,000 a year.
The biggest winners will be those who earn between £59,000 and £61,000. In that case, a family with two children would see an extra £2,000 coming into their household finances in the next tax year.
The reform has been claimed as a victory by Money Saving Expert Martin Lewis who has campaigned for changes to the high income tax charges in the child benefit system.
Speaking to his followers on X, formerly Twitter, he said: “I’m very happy about this.” He added that the Chancellor had told him the change was in response to the Money Saving Expert campaign.
You can see how the changes to child benefit will impact your household by using our interactive calculator below:
Child benefit is paid to anyone responsible for someone under the age of 16, or under the age of 20 if they are in approved education or training.
In the current tax year, it was worth £1,248 to households for the first child plus £826 for each additional child.
In the 2024-25 tax year starting from April 6, it will increase to £1,331 for the first child and £881 for additional children.
Currently, child benefit is only paid in full to households where no parent earns over £50,000. Once either parent starts to earn over this amount, they have to pay back one percent of the Child Benefit for every £100 of income earned above £50,000 a year.
It means that once the highest salary in a household goes over £60,000 a year, they are required to repay 100 percent of the child benefit as a tax charge, usually through a self-assessment in the January after the end of the tax year.
This is called the High Income Child Benefit Charge and has been criticised as unfair because a couple who both earn £49,000 (a joint income of £98,000) keep the full amount of child benefit. In contrast, a single-parent household earning £60,000 receives nothing after paying back the tax charge.
Under the new system, the lower limit will be lifted from £50,000 to £60,000 – which means any household where the highest earner is paid less than £60,000 will receive the full amount of child benefit.
Once a person’s salary goes over £60,000, they will start to incur the tax charge but it will increase at a lower rate. This means their salary will have to be over £80,000 before the tax charge wipes out the full amount of child benefit, and it will no longer be worth claiming.
It is expected that 170,000 households will no longer pay the High Income Benefit Charge due to the change in the rules, which come into effect on April 6.
The Chancellor announced there will be a consultation in the next two years on further reforms to child benefit, in particular looking at whether it should be based on household income, rather than on individual income.
Who can claim child benefit?
To claim child benefit, people need to live in the UK and be responsible for someone under the age of 16.
This usually means they live with the child, or they pay at least the same amount as child benefit towards looking after them. Only one person can claim child benefit, even if a person is in a couple.
People may be able to keep on claiming child benefit until the child turns 20 if they are in approved education or training. This can include A-Levels, NVQs or even home education, but it does not include university or BTEC qualifications.
