Budget 2021: Thousands of families ‘could lose some or all of their child benefit’

Thousands of households could lose some or all of their child benefit payments over the next four years, it has been reported.

Families stop receiving the full child benefit when one of the parents’ salaries reaches £50,000, and they lose all of it when their pay reaches £60,000.

The upper limit was set by former Chancellor George Osbourne in 2013.

According to the Mail Online, one in four families could lose all or some of the benefit within the next four years after Rishi Sunak on Wednesday decided not to uprate the salary at which people stop receiving the full amount in line with inflation.

It means that child benefit for the eldest child could go up from £20.70 to £21.05 per week because of the rising cost of living, going up by 1.7 per cent, reports the BBC.

Financial expert Sir Steve Webb, a former minister and now a partner at consultants LCP, told the Mail Online: “By freezing the £50,000 threshold, the Chancellor will bring hundreds of thousands of families into the child benefit tax net.

“Many of these families are not rich but will now have to go through the hassle of registering for self-assessment and will face additional bills as their wages rise.

“The £50,000 threshold was set in 2013 but has not been increased since, which means that the policy is steadily biting on more and more families. If the child benefit tax charge is to be retained, the threshold should be set on an objective basis, and not simply bite more heavily in an arbitrary way year after year.”

Sir Steve estimates that around 250,000 families will be drawn into the net if nominal average earnings increase by 3 per cent over the next four years.

The Institute for Fiscal Studiesnoted in 2019 that continuing the freeze on the threshold would mean “significant numbers of families who do not contain a higher rate income taxpayer will begin to lose their child benefit for the first time” by April 2021.

Under the current policy, it suggested that the number of families affected by the withdrawal of child benefit would continue to increase, reaching 21 per cent (1.6 million) in 2022–23.

A Treasury spokesman told the Mail Online: “We have a responsibility to target our support to those most in need, which is why it’s fair that we are maintaining the current high income child benefit charge threshold.”

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