Child benefit UK changes explained
Should I still claim child benefit if I have to pay back some or all of it?
It's usually worth claiming child benefit, even if you have to pay back some or all of your entitlement. This is because claiming ensures you get your National Insurance credits. These credits count towards your state pension and help protect your entitlement to state benefits in the future.
Moreover, if your circumstances change and your income drops below the threshold, you'll start receiving the child benefit again in full. There's also the chance that the government could change the rules about paying back some or all of your child benefit, so it's worth registering so that you receive updates if and when the rules change.
How do I work out how much High Income Child Benefit Charge I have to pay?
You pay 1% of your child benefit for every £100 of your adjusted net income over £50,000. So, if your income is between £60,000 and £80,000, you may still get some child benefit, depending on how many children you have. Once your income exceeds £80,000, you'll need to pay back the entire amount you receive.
For example, if you have one child and your income is £65,000, you will pay a child benefit charge of £360 a year, which works out at £30 per month. That means you will lose £120 a year in child benefit payments, but you'll still get it for your child and you'll receive National Insurance credits, which count towards your state pension.
How can I get more help and advice?
You can find out more about child benefit and how to make a claim on the government website, or by visiting the Citizens Advice or MoneyHelper websites. Citizens Advice provides free information and advice on many matters, including benefits and how to make a claim. MoneyHelper is a free service from the Money and Pensions Service, with lots of help and advice about all aspects of personal finance. Both websites provide online calculators, so you can work out how much child benefit you are entitled to and how much you might have to pay in tax, depending on your income.
What about other benefits for families?
As your children grow up, there are other benefits that might become available to you, depending on your circumstances. These include:
Child Tax Credit: A means-tested benefit for people on low incomes, providing up to £2,940 per year per child.
Working Tax Credit: A means-tested benefit to top up wages for people on low incomes who work a certain number of hours.
Universal Credit: A single payment that replaces several benefits and tax credits for people who are working or not working.
You can also find out more about specific benefits that may be available to you based on your family situation or specific needs through the government website.
Is it worth claiming child benefit if you earn more than £50,000?
Whether it's worth claiming child benefit if your income exceeds £50,000 depends on a few factors. If you or your partner earns between £50,000 and £60,000 a year, you may face the High Income Child Benefit Charge (HICBC). In this case, you'll still receive the child benefit payments but will have to pay back some via your tax return. The amount you'll pay back will increase as your income rises, but you'll still receive your National Insurance credits towards your state pension.
If either you or your partner earns more than £60,000 per year, you have to repay the full amount of child benefit received. However, it's still worth claiming so you can get your National Insurance credits.
What are the changes to the High Income Child Benefit Charge?
As of April 2024, the threshold for the High Income Child Benefit Charge will increase from £50,000 to £60,000. Furthermore, you won't have to pay back the entire amount of child benefit received unless you or your partner earns more than £80,000. These changes could make it financially worthwhile to continue claiming child benefit, even if you have a higher income.
Furthermore, HMRC might start collecting data about all adults living with the child in April 2026. This would mean child benefit claims would be judged based on total household income. This policy change has been largely welcomed as it addresses the perceived unfairness of the current system, where a household with two earners just under the threshold receives more than a household with a single high earner.
Why is a consultation process needed?
The consultation about the HICBC is essential to gather feedback for potential policy changes. It helps the government understand the public's views and concerns, ultimately helping to create a fairer system of child benefit support. The government might also use the consultation process to gather ideas and suggestions on how to improve the administration of child benefit.
Stakeholders such as charities, academics, and tax experts can also contribute their valuable insights during the consultation process. This open dialogue can help shape the policy change to be more effective and responsive to real-world situations, making sure it supports those who need it the most.
Is the High Income Child Benefit Charge fair?
The fairness of the High Income Child Benefit Charge (HICBC) is a topic of frequent debate. There are strong arguments on both sides.
Arguments in favor of the HICBC
Those who support the HICBC argue that it's a reasonable way to recover some of the costs of providing child benefit from higher-income families who can afford to contribute. They contend that it wouldn't be fair to taxpayers if everyone, regardless of income, received the same level of support.
Furthermore, supporters argue that the HICBC ensures that those who are financially better off contribute more towards the costs of raising children. They might highlight that child benefit is intended to help families with the costs of children, and wealthier families theoretically have less need for this additional financial assistance.
Arguments against the HICBC
Critics of the HICBC argue that it's unfair to penalize families where one parent earns over the threshold as opposed to two earners who fall slightly below it. They often point out that this discourages people from seeking higher-paying jobs.
Additionally, opponents of the charge argue that it creates a “cliff edge” at the £50,000 mark. They suggest this discourages people from increasing their earnings or taking on more responsibility in their jobs due to the significant financial consequences of surpassing the threshold. This could stifle ambition and negatively impact career progression.
How could the system be improved?
There are suggestions for how to make the HICBC fairer. One suggestion is to reduce the benefit gradually as income goes up, rather than having a single point where families start to lose it all at once. This could address the "cliff edge" problem by making the transition smoother.
Another widely supported change is basing eligibility on total household income instead of individual income. This would create a fairer system, considering that two-income households have a higher earning potential. The proposed policy change of HMRC collecting information about all adults in the household is a step toward addressing this criticism.
Alternatives to the High Income Child Benefit Charge?
Some advocate for means-testing child benefit to provide more targeted assistance to families who need it most. This would ensure that only those on lower incomes receive the financial support.
Conversely, others propose making child benefit universal, ensuring all parents receive it regardless of income. Proponents of this system believe it would reduce administrative costs and avoid the unfairness of the current system. It would promote a sense that society collectively recognizes the value of children and the costs of raising them.
What does the future hold for child benefit?
The debate over the High Income Child Benefit Charge (HICBC) and the changing regulations highlight the ongoing conversation about how best to support families in the UK. Several factors could influence the future of child benefit.
Economic climate: During times of economic hardship, the government faces pressure to reduce welfare spending. On the other hand, times of economic crisis often mean families need more support, leaving child benefit in a precarious position.
Political priorities: The priorities of the government in power have a significant impact on the future of child benefit. Different political parties have varying views on the issue, with some advocating for greater support for families and others aiming to reduce the size of the welfare budget.
Public opinion: Public opinion plays a crucial role in shaping government policy. There is a growing debate around the fairness of the HICBC and whether it's the most effective way to support families.
Possible changes to child benefit
In the future, we may see further changes to the value of child benefit. Its value could be increased or decreased, depending on how much the government is able or willing to spend. In 2010, previous UK governments froze the amount for several years.
Additionally, changes could be made to the way the High Income Child Benefit Charge is calculated. The government could implement a gradual tapering of the benefit instead of the existing cut-off point, or they could move to a means-tested system where only lower-income families qualify.
It's also possible that child benefit could be merged with other benefits to create a more streamlined system. The UK government has already consolidated several benefits for working-age people through the introduction of Universal Credit. Similar measures for child-related benefits are not unrealistic in the future.
Impact of potential changes on families
Any changes to child benefit will have a ripple effect on families across the UK. Increasing the amount would help many families cope with the rising cost of living and ease some financial pressures. Conversely, cuts to child benefit could exacerbate financial hardship and push more families into poverty.
Changes to the High Income Child Benefit Charge could impact working parents differently, potentially influencing their career choices and work-life balance. Moving towards a system based on household income or means-testing might be considered fairer to many but could also create additional complexity and potentially discourage some parents from seeking higher-paying roles.
The future of child benefit is uncertain. It reflects the complexities of welfare policies and a constant balancing act between supporting families, managing public spending, and ensuring a fair and efficient system for all.
Where can I find more information?
There are several places where you can find more information about child benefit and how the rules might impact you:
GOV.UK: The official UK government website has detailed information about child benefit, including eligibility criteria, how to apply, and updates to the rules and regulations. You can access this information here:
Citizens Advice: Citizens Advice is a charity providing free, confidential advice and information on various matters, including benefits. They can offer guidance on whether you're eligible for child benefit and assist with the application process. You can visit their website here:
MoneyHelper: MoneyHelper is a free service by the Money and Pensions Service, offering a vast range of resources and guidance on personal finances. They offer tools, such as a child benefit calculator, to help you understand your potential entitlement and any impacts of the High Income Child Benefit Charge. You can find these tools at:
Child Poverty Action Group (CPAG) is a charity that campaigns for an end to child poverty in the UK. Their website provides detailed information about the welfare system, including child benefits, and they regularly publish relevant news and analysis. You can visit their website at:
Additional considerations:
Childcare costs: Child benefit does provide financial support, but it may not fully cover the rising costs of childcare. It's essential to factor in the costs of childcare when assessing your overall financial picture after having children.
Eligibility Changes: Stay updated on changes to the child benefit eligibility regulations and rules around the HICBC, as it can affect your financial situation. The government website and resources like Citizens Advice provide reliable information on any updates or policy changes.
Conclusion
Child benefit is a valuable source of financial support for many families in the UK. Understanding the eligibility rules, how the High Income Child Benefit Charge works, and how to apply can help you access all available benefits and support. Staying informed about existing resources and future changes to the system can ensure that you're making the best financial decisions for your family.
