Chancellor Jeremy Hunt has announced reforms to the “unfair” High Income Child Benefit Charge, which will see the levy assessed on a household basis starting in 2026.
Under rules introduced in 2013, child benefit starts to be withdrawn when one parent earns over £50,000 a year. This means two parents earning £49,000 a year receive the benefit in full but it is withdrawn from households earning less overall if only one parent earns over £50,000.
“The way we treat Child Benefit in the tax system is confusing and unfair,” Jeremy Hunt said.
Hunt said he will consult on moving the child benefit to a household-based system, which will be introduced by April 2026.
In the meantime, Hunt confirmed that the threshold at which the benefit will be withdrawn will be raised from £50,000 to £60,000. The Chancellor also said he will raise the top of the taper at which it is withdrawn to £80,000
“No one earning under £60,000 will pay the charge, taking 170,000 families out of paying it altogether,” he said. “Because of the higher taper and threshold, nearly half a million families with children will save an average of around £1,300 next year,” Hunt continued.
According to the Office for Budget Responsibility, this change will see an increase in hours among those already working equivalent to around 10,000 more people entering the workforce full time.
“When it works, it’s good for children, it’s good for parents, and it’s good for the economy because it helps people into work,” Hunt said.