Child Benefit
[ch 4: pages 71-72]Child Benefit is a tax-free payment that is aimed at helping parents cope with the cost of bringing up children. One parent can claim £20.70 a week for an eldest or only child and £13.70 a week for each of their other children. The payments apply to all children aged under 16 and in some cases until they are 20 years old.
The current rates are frozen and have therefore not increased this year.
Until 2013 the benefit was available to every family with children. But in the 2012 Budget, Chancellor George Osborne announced an amended plan to steadily withdraw Child Benefit from families where one parent earns more than £50,000. In detail, the benefit received is recouped gradually as the income of the highest earning parent rises above £50,000, with the Child Benefit being eroded completely once their income is £60,000 or more. The changes to the rules reduced the entitlement of about 1.2 million families.
Any Child Benefit paid to high-earners who have failed to opt out is clawed back through the High Income Child Benefit Charge, administered by HM Revenue and Customs. If somebody earning more than £50,000 or their partner keeps claiming Child Benefit, then the higher earner must admit this in a self-assessment tax form. The IFS estimated that 500,000 extra people might have to fill in these forms as a result of the change. The change came into effect on 7 January 2013.
In June 2015, the TUC published a report, Eroding Child Benefit, showing that by the time of the next election a family with two children is already likely to be more than £9 a week (£470 a year) worse off, regardless of further cuts not yet announced. The report shows that a couple with two children are already almost £6 a week worse off as a result of the changes brought in under the Tory-led coalition government, as Child Benefit has been frozen, capped and taken away from better off families.
In total, the report shows that a family with two children lost out on £1,084.20 between 2011-12 and 2015-16. The cumulative impact of the government’s planned changes would be £2,017.60 for a family with two children between 2016-17 to 2020-21 based on the 2015 Office for Budget Responsibility (OBR) projections for the consumer price index (CPI) and the retail price index (RPI). The TUC calculated the total loss at a huge £3,101.80.
Eroding Child Benefit can be downloaded from the TUC website at: https://www.tuc.org.uk/sites/default/files/ErodingChildBenefit_0.pdf.