Several hundred thousand families are to be better off, some by as much as £3,000, during the 2024-25 tax year after the government finally admitted that a child benefit measure brought in 11 years ago had not worked fairly.
A change to child benefit is just one of a raft of changes coming in on 6 April, the start of the new tax year, including a cut in national insurance for employees to 8% from 10%.
The high income child benefit charge was introduced in 2013 and means child benefit paid to higher earners is clawed back via the tax system. Since then the earnings threshold at which the tax penalty kicks in has remained frozen at £50,000 a year, causing more people to be hit by the charge.
However, in the budget this March, the chancellor, Jeremy Hunt, made a number of changes, including lifting the threshold to £60,000. This is one of a number of changes, both positive and negative for people’s finances, that take effect from Saturday.
The child benefit tax charge was originally announced by George Osborne in 2012, when he was the chancellor, and has long proved controversial. It affects more than a million families, who either have money clawed back by HM Revenue & Customs or who opt out of child benefit to avoid the penalty.
This week, Laura Trott, the chief secretary to the Treasury, said the budget changes meant the government was “ending the unfairness in the child benefit system”.
In addition to raising the threshold to £60,000 a year, the government has halved the rate at which the penalty is charged, so people lose all their child benefit only once they earn £80,000. Prior to the changes someone earning £60,000 lost all of their child benefit.
Another change taking effect on 6 April is a rise in child benefit, from £24 to £25.60 a week for the eldest child, or an only child; and a rise from £15.90 to £16.95 a week for each additional child.
That means the gain for someone earning £60,000 who has two children will be £2,212 in 2024-25. If that person has three children the gain is £3,094.
About 170,000 families with children would no longer be affected by the charge, and nearly 500,000 families would save an average of about £1,300 apiece in 2024-25, Trott said.
The government wants to move to a child benefit system based on household, rather than individual, incomes by April 2026.
Here are some of the other changes taking effect on 6 April:
