Major shake-up of child benefit rules that could give 700,000 families £1,500 cash boost planned by Tories

SEVEN hundred thousand families will see an average £1,500 tax cut in a shake-up of the child benefit system under Tory plans.

Chancellor Jeremy Hunt plans to double the threshold for when households start paying it back to £120,000.

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The hand-out will be paid back gradually through a taper rate until the overall family income hits £160,000.

The new system will move to assessing the joint family salary rather than on an individual basis in a bid to end the unfairness.

There is a clear choice for voters at this election: bold action to cut taxes for working families under the Conservatives, or a £2094 tax rise to fill Labour’s £38.5 billion spending black hole

Chancellor Jeremy Hunt

The biggest beneficiaries will be single-earner households and homes where one individual earns substantially more than the other.

It follows a decision at the Budget in April to raise the threshold at which child benefit starts paying it back moved from £50,000 to £60,000. 

It is only paid back in full at £80,000 under current rules.

This change alone meant that 170,000 families no longer paid the tax charge – with 500,000 families paying £1,260.

The new plans will be paid for by clamping down on tax avoidance which will bring in £6 billion and will cost £1.3 billion in 2028/29.

Chancellor Jeremy Hunt said: “Today we have announced a £1,500 tax cut for parents to boost families’ financial security and give them more money to spend on the things that matter most.

“Raising the next generation is the most important job any of us can do so it’s right that, as part of our clear plan to bring taxes down, we are reducing the burden on working families.

“There is a clear choice for voters at this election: bold action to cut taxes for working families under the Conservatives, or a £2094 tax rise to fill Labour’s £38.5 billion spending black hole”.

What is child benefit?

Child benefit is paid to parents to help cover the costs of childcare.

It is paid at two weekly rates – £25.60 for your eldest or only child and £16.95 for any additional children.

Payments are usually made every four weeks, on a Monday or Tuesday, but sometimes are made weekly.

If you are claiming child benefit for a child under 12, you also receive National Insurance (NI) credits.

NICs count towards your State Pension so claiming the benefit can be useful if you are missing any.

The reason NICs are so important is because you need 35 NIC years to receive a full new State Pension.

You are considered a parent, or responsible for a child, if you live with them and are paying at least the same amount as the Child Benefit rates to look after them – for example for food, clothes or pocket money.

It’s important to note that eligibility changes if a child goes into hospital or care and if your child starts to live with someone else.

If you’re not sure about your eligibility, you can contact the child benefit office.

Since 2013, if you or your partner earns over a certain amount, you also have to start paying some child benefit back.

Go over a second threshold and you have to pay it back in its entirety.

This is through what’s known as the High Income Child Benefit Charge (HICBC).

The threshold through which you have to start paying money back is now £60,000 after it rose from £50,000.

The rate at which you have to pay the entire allowance back is £80,000, which recently increased from £60,000.

It’s up to you to pay the charge, though, and if you don’t, you can be stung with a nasty bill.