Child profit tax threshold set to DOUBLE – why is that this controversial?

More households will be in line for higher child benefit payments if the Conservatives stay in Government after 4 July, as the party has promised to double the threshold to £120,000 per household before it gets taxed.

Child benefit is paid to parents or those responsible for bringing up children. The current maximum payments are £25.60 per week for a first child and £16.95 for additional children. 

But child benefit has been a contentious subject since 2013, when former chancellor George Osborne changed the system so that households earning more than a certain amount would get less, or none at all. 

Here is everything you need to know about the changes planned to child benefit, and how it could affect you.

Child benefit tweaks: The Conservatives have announced plans to pay more child benefit to more families, but the news has been criticised as too little, too late by some experts

What is the current controversy around child benefit?

The issue surrounds the child benefit high income charge, which was brought in by George Osborne in 2013.

The current version of this system is that when one parent earns £50,000, child benefit payments are reduced, vanishing entirely if they earn £60,000 or above.

But the problem with the system is that it penalises single parents and couples with one high earner.

If two parents each earn £49,000 – just £1,000 under the current threshold – they would get full child benefit and a household income of £98,000.

But if one parent earns £60,000 and the other earns nothing, their family gets no child benefit at all.

The Conservatives plan to move that minimum threshold to £60,000 in 2026 if they are still in Government, with child benefit payments being eroded up to a maximum salary of £80,000.

What are the latest changes to child benefit?

The Conservatives have now promised to increase the earnings level at which child benefit starts to be withdrawn to £120,000.

The other major change is that this limit will be per household, not per individual.

Households could earn up to £160,000 before they get no child benefit at all.

This means a single parent could earn up to £120,000 before they start losing child benefit, and a couple could have varying salaries and still keep full child benefit so long as their combined wages do not exceed that level.

Who benefits from these changes?

The Conservatives say 700,000 families would be better off by an average of £1,500 each.

The party thinks the child benefit tweak would cost £1.3billion a year by 2029-30.

Alice Haine, personal finance analyst at Bestinvest, says: ‘Doubling the threshold at which the high-income child benefit charge is applied to £120,000 from £60,000 and doubling the top taper – the point at which the benefit is completely withdrawn – to £160,000 from £80,000 would deliver a financial boost to parents currently missing out on this valuable benefit.

‘Even more significant is the pledge to base the benefit on overall household income rather than that of the highest earner. 

‘This will eradicate the unfairness of the current system, which penalises single-income parents or couples where one partner earns a significantly higher salary than the other.’

Why is it controversial?

The high-income child benefit charge has been an issue for more than a decade of Conservative Government, and plans to change it have only come in the run-up to the election. 

Danni Hewson, head of financial analysis at wealth manager AJ Bell, said: ‘There will be many voters wondering why this couldn’t have been done at any other point over the last 14 years, during which time frozen income tax thresholds and inflation have gnawed away at families’ incomes.

‘The Government may point to its more recent record and increases to free childcare provision will have helped families – in particular mothers who have struggled to afford to return to the workplace.’

Other experts said the best solution might be to stop meddling with child benefit and return to making universal payments, as happened before 2013.

Tom Waters, an associate director at the Institute for Fiscal Studies, said: ‘Raising the threshold to £120,000 and switching to household assessment would mean that only 900,000 families – 12 per cent of those with children – would still be losing some or all of their child benefit. That does mean that the problems affect fewer people.

‘But at the same time, at that point one has to ask whether it’s really worth having the additional administrative apparatus, rather than simply returning child benefit to being universal, as it always was before 2013. This would cost around another £1.5billion a year on top of the Conservatives’ plan.’

How to claim child benefit 

You can make a claim for child benefit or add another child to your claim at Gov.uk, either online or by downloading and filling in a printed form.

Payments are made every four weeks on a Monday or Tuesday, but you can be paid weekly if you are a single parent or get other benefits, like Universal Credit.

You are expected to report anything that might affect affect your child benefit, such as household changes or if you move abroad.

If a family split ups, only one person still gets £25.60 a week for the eldest child, but if there are two children who live with different partners they will both get £25.60 a week. For other children, the amount stays at £16.95.

If you have a blended family, only the eldest child qualifies for the £25.60 rate and any other children the £16.95 rate.

Claiming child benefit for a child means they will automatically get a National Insurance number shortly before they turn 16.