Thresholds for child benefit increase so what does this mean for you?
The amount that you can earn before child benefit payments are withdrawn has been increased in the Spring Budget, meaning that more families will be able to claim the benefit.
As of April 6, the High Income Child Benefit Charge (HICBC) threshold will increase up to £60,000.
It’s a tapered charge, so for every £200 that a parent earns that is above the £60,000 ceiling then you will be charged and lose 1% of your child's benefit.
Once a parent’s earnings are over £80,000 then it will work out that the charges are the same amount as the child benefit payment.
This is a significant difference from the current system, as one parent can earn £50,000 before child benefit payments are cut, and there is no benefit at all once salaries climb over £60,000.
The government is enthusiastic about the changes and has said that it will help more than half a million families., with the higher threshold allowing savings of an average of £1260 per year.
From the 2024/25 financial year the child benefit to the eldest or only child will be £25.60 per week, a rise from £24 under the current system.
While for other children parents will see weekly benefit payments of £16.95, another increase from the current rate of £15.90.
You can claim child benefits when a child is under the age of 16 or is under 20 and is in approved full-time education or training.
Only one person can receive child benefit but there is no limit on how many children you can claim for, and the allowance that you receive should be in your bank account every four weeks.
Research institute highlights what the changes will mean
The Institute of Fiscal Studies (IFS) in response to the child benefit changes said that as parents will begin to lose child benefits at the higher ceiling of £60,000, it will mean that 170,000 fewer families are affected during 2024/25.
It also said that the HICBC creates a particularly effective marginal tax rate for those who have several children, and while this will remain the same under the new system the impact of those tax rates will be lessened.
The IFS has also called for a thorough reform of HICBC, as the current design enables families with the same combined income can be treated very differently depending on how a household's income is distributed.
The government plans to address this issue and is looking to withdraw child benefits based on family income, as opposed to the income of the highest-earning parent from 2026.
Currently, there is an ongoing consultation process over the potential policy, in order to combat any practical challenges that might happen.
Of course, there is to be a general election this year and according to the polls the Labour Party is expected to win, so far it is unclear whether they would support the changes that the current government is looking to make.
What is the relationship between child benefit and national insurance?
If you claim child benefit you can also claim national insurance credits which count towards your state pension, and can fill any gaps in your national insurance records.
The credits can be claimed if you are not working, or do not earn enough to start making national insurance contributions.
Two types of credits are available, the class 1 category can be placed towards your state pension and the New Style Jobseeker’s Allowance benefit which is a contributory system.
While class 3 credits count towards your pension only.
What should you do if family circumstances change?
Any changes to your family situation that could affect child benefit payments must be reported to the HMRC, if you do not you might be receiving all the money that you may be entitled to under different circumstances.
There are many changing situations that the HMRC would need to know about, such as if your child is receiving universal credit or a job seeker’s allowance.
Also if your child changes his or her name, moves in with a partner or in a more extreme circumstance goes missing.
If your child leaves education after the age of 16 then the HMRC should also be contacted, and if a child is hospitalised for more than 12 weeks or enters into care or residential accommodation for longer than 8 weeks.
Typically after this time has elapsed you are no longer entitled to child benefit.