What the Child Benefit cut means for you

John Fitzsimons
by Lovemoney Staff John Fitzsimons on 04 October 2010  |  Comments 81 comments

Ahead of the Conservative Party Conference, the Chancellor George Osborne has announced a significant cut to child benefit. Here's what you need to know about how you will be affected.

What the Child Benefit cut means for you

How does child benefit work at the moment?

Child tax benefit is currently a universal benefit – in other words, one available to all of us, no matter our financial position. Parents are paid £20.30 a week for the first child, and £13.40 a week for any other children.

For a family with three children, that’s in the region of £2,500 a year in benefit payments from the Government.

What is changing?

The Chancellor has decided that child benefit will be scrapped entirely for higher rate taxpayers, those paying the 40% rate of income tax.

In other words, if you earn £44,000 a year or more, you will no longer be eligible for such payments.

When is this happening?

The Government’s plans are set to come into force in 2013.

Why are they doing this?

The Chancellor’s main task at the moment is to rectify the nation’s deficit, and he believes this is a fair way of improving our bottom line.

Currently, child benefits cost the Government around £12bn a year. The Government reckons that by implementing this change they can save around £1bn.

There is also a moral argument. Osborne believes that it is not right that the tax paid by lower income families should go towards the upkeep of the offspring of the rich.

How many of us are affected?

According to ministers, around 1.2 million families across the nation will be hit by this benefit cut. That’s around 15% of all families in the UK.

Is this the fairest way of changing child benefits?

The Chancellor argues that this is a simple way of reforming the child benefit system. However, it does leave open a glaring loophole.

Find out everything you need to know about your children's savings and tax

The change only affects those families where one worker earns in excess of £44,000. It makes no provisions for the household income, though.

As a result, a family where both parents earn £43,000, giving them a total household income of £86,000 would still be able to claim the benefit, while a family where only one member is working and earning a salary of £45,000 would not.

What can I do to prepare for this change?

Start saving now for your children. With the right account, you can earn as much as Earn 6% on children’s savings.

There are also easy ways to Protect your kids from the taxman. And did you know that, with a bit of careful planning, you can Turn your kids into millionaires?

So don’t despair – fight back now against the cuts, no matter which rate of tax you pay!

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Comments (81)

  • courageh
    Love rating 0
    courageh said

    i would just like to know how many of you are old! while i agree with the middle class not getting child benefit i do not agree with limiting how many children you have. it is not ur choice! i have 2 kids and never thought i would split from there father but now i am left having to claim benefits, so to all of you! YOU DO NOT KNOW WHAT SITUATION EACH PERSON IS IN, SO DO NOT BOTHER COMPLAINING!

    Report on 25 October 2010  |  Love thisLove  0 loves
  • Mummy Soph
    Love rating 0
    Mummy Soph said

    The trouble is with benefits (re kids) is that circumstances change. My ex husband and I had 4 kids, which we could afford. My new husband earns half what my ex does. Yes, we get a top up from the govt (tax credits) and child benefit. I also get maintainence from my ex. Our household income is less (by quite a lot) than £44,000. I save monthly towards holidays, christmas, birthdays, kids clubs, car expenses etc. We are careful with money - we go camping for our holidays, I save up clubcard vouchers for token for days out, my husband and I rarely go out. I resent feeling like all low earners are scroungers. I am staying at home (rather than paying others to raise my kids) and I am proud of the way my kids are turning out. I work hard, I am up at 6.30 or earlier and effectively then work until all of the kids are in bed (8.30). My husband works 3 jobs.

    I am not whining, but I am saying that some of us work hard and don't have high incomes - not everyone can have a well paid job, that's the way of the world!!! I work hard to make my kids into good citizens for the future, my husband works long hours rather than quitting and letting the state pay. We aren't scoungers, we are just on a low income!

    That said, I think it's potty that if I went to work part time, we would be worse off under the current system if I did go to work. However, once my youngest is at school, I certainly intend to work part time. I happen to feel that it is important that I am here for my children. We don't have iPhones, foreign holidays etc etc, but we have a loving, comfortable family and I am content with it...


    Report on 26 October 2010  |  Love thisLove  0 loves

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