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More households will be in line to receive higher child benefit payments if the Conservatives remain in Government after July 4, as the party has promised to double the threshold to £120,000 per household before being taxed.
Child benefit is paid to parents or persons responsible for raising children. The current maximum payments are £25.60 per week for the first child and £16.95 for additional children.
But child benefit has been a contentious issue since 2013, when former chancellor George Osborne changed the system so that households earning more than a certain amount received less, or nothing at all.
Here you will find everything you need to know about the planned changes to child benefit and how they could affect you.
Child benefit adjustments: The Conservatives have announced plans to pay more child benefits to more families, but some experts have criticized the news as too little, too late.
What is the current controversy surrounding child benefit?
The issue is around the high income charge for child benefit, which was introduced by George Osborne in 2013.
The current version of this system is that when a parent earns £50,000, child benefit payments are reduced and disappear completely if they earn £60,000 or more.
But the problem with the system is that it penalizes single-parent families and high-income couples.
If two parents each earn £49,000 (just £1,000 less than the current threshold), they would get full child benefit and a household income of £98,000.
But if one parent earns £60,000 and the other earns nothing, their family receives no child benefit.
The Conservatives plan to raise that minimum threshold to £60,000 in 2026 if they are still in government, with child benefit payments to be reduced to a maximum salary of £80,000.
What are the latest changes to child benefit?
The Conservatives have now promised to increase the income level at which child benefit starts to be withdrawn to £120,000.
The other important change is that this limit will be per household, not per individual.
Households could earn up to £160,000 before not receiving any child benefit.
This means that a single parent could earn up to £120,000 before starting to lose child benefit, and a couple could have different salaries and still keep full child benefit as long as their combined salaries do not exceed that level.
Who benefits from these changes?
The Conservatives say 700,000 families would be better off with an average of £1,500 each.
The party believes adjusting child benefit would cost £1.3bn a year by 2029-30.
This will eradicate the unfairness of the current system, which penalizes single-income parents or couples where one partner earns a significantly higher salary than the other.
Alice Haine, personal finance analyst at Bestinvest, says: “Doubling the threshold at which the high-income child benefit charge applies from £60,000 to £120,000 and doubling the maximum reduction (the point at which completely withdraws the benefit) to £160,000 from £80,000 would provide a financial boost to parents who do not currently enjoy this valuable benefit.
‘Even more significant is the commitment to base the benefit on the overall household income rather than that of the highest earner.
“This will eradicate the injustice of the current system, which penalizes single-income parents or couples in which one partner earns a significantly higher salary than the other.”
Why is it controversial?
The collection of child benefit for high earners has been an issue for more than a decade under the Conservative government, with plans to change it only emerging in the run-up to the election.
Danni Hewson, head of financial analysis at wealth manager AJ Bell, said: “There will be many voters wondering why this could not have been done at any other time in the last 14 years, during which time the frozen tax thresholds Income tax and inflation have eroded family incomes.
“The Government can point to its most recent record and increases in free childcare provision will have helped families, particularly mothers who have found it difficult to return to the workplace.”
Other experts said the best solution might be to stop interfering with child benefit and return to universal payments, as was the case before 2013.
Tom Waters, associate director of the Institute for Fiscal Studies, said: “Raising the threshold to £120,000 and moving to household assessment would mean that only 900,000 families – 12 per cent of those with children – would still lose some or all of your child benefit. That means the problems affect fewer people.
“But at the same time, at that point one has to ask whether it is really worth having an additional administrative apparatus, rather than simply returning child benefit to being universal, as it always was before 2013. This would cost around another £1.5bn a year on top of the Conservatives’ plan.’
How to claim child benefit
Can submit a child benefit claim or add another child to your claim on Gov.ukeither online or by downloading and completing a paper form.
Payments are made every four weeks on Mondays or Tuesdays, but you can be paid weekly if you are a single parent or get other benefits such as Universal Credit.
You are expected to report anything that may affect your child benefit, such as moving abroad or moving abroad.
If a family splits, only one person continues to receive £25.60 per week for the eldest child, but if there are two children living with different partners, they will both receive £25.60 per week. For the rest of the children, the amount remains at £16.95.
If you have a mixed family, only the eldest child is entitled to the £25.60 rate and the other children are entitled to the £16.95 rate.
Claiming child benefit for a child means that they will automatically receive a national insurance number shortly before their 16th birthday.
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