Child benefit cuts and what they mean for youGovernment to scrap child benefit for well-off

04 October 2010

Chancellor George Osborne announced today that the government will abolish child benefit payments for families with one or more higher-rate taxpayers.

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The cuts, which will take effect from 2013, will hit any family which has at least one higher-rate taxpayer.  

How will the cuts be applied?

The cuts will only affect those families where one person earns in excess of the 40% tax threshold, just slightly less than £44,000 a year. If two of you work but both earn just below the higher-rate tax threshold you will still be eligible for child benefit.  

This creates an anomaly where a family with one higher-rate taxpayer earning just over the £44,000 threshold will lose the benefit, but another family that enjoys joint earnings of up to £87,752 with two earners neither of which is a higher-rate taxpayer could still receive the benefit.  

Around 15% of families, that's about 1.2 million families, will be affected.

How much does the Government hope to save?

Child benefit is currently paid to 7.7 million families and costs £12 billion. These cuts are expected to bring savings of around £1billion.

How much is child benefit worth?

Child benefit is currently paid to all families with children, no matter what their income. Parents receive £20.30 a week for the first child, and £13.40 a week for any other children. A family with two children receives around £1,750 a year, untaxed. 

'A fair measure'

Speaking on BBC Breakfast today, Chancellor George Osborne said: 'This is a big decision for us. We think it's absolutely necessary and fair given the financial situation we face. It's very difficult to justify taxing people on much lower incomes in order to pay the benefit to some of the better-off in society.' 

Take a look at our advice guide on tax and your children to find out more about the types of benefits you might be eligible for, as well how your kids are taxed and the tax treatment of childcare. 

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