Higher Rate Tax Payers to lose Child Benefit

Chancellor George Osborne has announced that from 2013 families who earn the higher rate of tax will no longer get Child Benefit. The cut will affect people on the 40% and 50% income tax rates.  It will affect approximately 15% of Child Benefit recipients and is intended to raise £1 billion as part of the wider reform of the benefits system.

The intended changes will not require means testing but will instead use the tax categories to identify those who earn over £44,000.  The announcement from the Chancellor states that the cuts will only affect families with one or two high earners and will not affect parents on more modest incomes which might add up to over £44,000 who will keep the benefit.  This means that a household with two people earning, for example, £40,000 each could still receive Child Benefit but a household where just one person was earning £50,000 would have Child Benefit stopped.  In justifying this the Chancellor said the Government was trying to keep the administration of the system “as simple as possible.”
 
Lucy Cochrane, Information and Policy Officer with Citizens Advice said: “it has become increasingly difficult to justify paying Child Benefit to people who are high earners.  If Child Benefit has to be cut then it is fairest to cut it on income grounds.”

At present Child Benefit is a universal benefit paid to all those with children up to the age of 16 (or 19 if in full-time education).  It is worth £20.30 a week for the oldest child and £13.40 per week for any other children.  In the Emergency Budget announced earlier this year the Chancellor announced a freeze in Child Benefit payments for the next three years.