Tory vow to change Child Benefit rules sensible but perhaps too little too late

Following the Tory pledge to change the thresholds for the High-Income Child Benefit charge, Shaun Moore, tax and financial planning expert at Quilter, has commented.

“The Tory’s announcement that they will peg the High-Income Child Benefit charge to household income will be music to many parent’s ears. However, this is not a new problem, and it has taken years for the penny to drop in Government that the current rules create a perverse environment where a high earning single parent could lose their full Child Benefit entitlement despite having a much lower household income than two parents earning just below the lower threshold. 

“The government did already intonate that they were moving to a system pegged to household income but the reasonably high thresholds just announced will mean the tax take from the High Income Child Benefit charge will reduce significantly and the vast majority of parents would not suffer the charge. Whether this long-awaited but sensible policy will see the light of day is yet to be seen though. Although this will certainly add more complexity for HMRC into the Child Benefit system, the benefits of rectifying the current system’s unfairness far outweigh these challenges. 

“For example, a couple with two children where one person earns £80,000 and another earns £20,000 will now be able to keep all £2,212.60 of their Child Benefit when they previously would have kept none. Similarly, one parent earning £70,000.00 while the other earns roughly the average salary in the UK of £35,000.00 will be over £1,106.30 better off and receive the full Child Benefit under these proposals.”

Below are some examples of a variety of incomes and how they will be impacted if the new policy comes into force: