Spring Budget 2024 – Changes to the High-Income Child Benefit Charge

You may have read my previous article analysing the high-income child benefit charge and its impact for parents. In today’s Spring Budget, Jeremy Hunt recognised that there was an unfairness in the charge, such that two parents with an income... Read more

You may have read my previous article analysing the high-income child benefit charge and its impact for parents.

In today’s Spring Budget, Jeremy Hunt recognised that there was an unfairness in the charge, such that two parents with an income of £49,000 each would be able to claim the benefit in full and would not fall in the charge as neither one has an income over £50,000 but a single parent with an income of £51,000 would suffer from a clawback.

Immediate measures to improve the system were announced to increase the threshold from £50,000 to £60,000 from 6 April 2024. The top rate for that taper would also be increased from the previous £60,000 to £80,000 so that individuals earning over £80,000 will pay the full amount of the benefit as a charge.

The government also intends to make a change by 2026 to assess the charge based on a household income rather than on an individual basis, and consultations are expected in due course.

The increase in the threshold is a welcome one but if you as I point out in my previous article, inflation alone since the introduction should have increased this base threshold to over £65,000 so in real terms the increase still falls short of inflation.

Families where one parent earns over £60,000 currently often choose not to claim at all, meaning that they miss out of the automatic benefit of 12 years of state pension credits from being a claimant and opting out of receiving those payments. This can be a lifeline in the future should they fall ill or otherwise become unable to work.

The increase in the threshold, should mean that many more families earning an average wage will be able to benefit from some or all of the child benefit and associated state pension credit. The average wage in London is currently £44,190, so even with the base threshold increase to £60,000, the charge still has a way to go before being truly a ‘high-income’ charge.

Furthermore, inflation was noted in the Chancellor’s budget to be currently 4%, suggesting by the end of the year the average wage would be in the region of £46,000.

In order for HMRC to be able to evaluate a household income in the future for the charge, they will need to accurately be able to assess the income for a household which would suggest a drive towards digitalisation of tax records and a significant improvement in their systems, which at the time of writing don’t talk to one another!

Related content

• Clair Dart
• ARTICLES