The chancellor’s budget on Wednesday brought changes to the high-income child benefit charge and details of a new British Isa for savers. We spoke to a parent who is now paying the charge and an investor to get their reactions to the announcements.
‘The only annoying thing is that I will have to wait’
Andrew Brown, 38, lives in Sheffield and works as a service engineer. Recent pay rises designed to help him and his colleagues with the cost of living mean he is paying back all of the child benefit he and his partner, Nadine, claimed for his two daughters, aged two and seven. The chancellor’s plan to raise the threshold for repaying the benefit in the short term and overhaul it eventually is a welcome surprise.
“Previously I fell just underneath the £50,000 bracket where you have to pay back child benefit, but last year I moved into it. I stayed at the same company and our director has been very generous with pay rises – all of a sudden I have to pay everything back,” he says.
This has come to more than £2,000 for the 2022-23 tax year – the latest year for which he has done a self-assessment form so far – plus about £70 in interest for spreading the payments over 10 months. He is the sole earner in the family, but the system of clawing back the charge is based on whether anyone is making more than £50,000, rather than the total household income.
“I did some calculations and I worked out that on the money I earn between £50,000 and £60,000, when you take off the tax and the child benefit charge I’m working for the less than the minimum wage, in a skilled job,” he said before the budget statement.
“We’re not hard done by – we’re still able to put food on the table but that child benefit was used for exactly what it says on the tin: it went on my daughters.”
On Wednesday, Jeremy Hunt announced that he planned to change the system so that by April 2026 it was based on household incomes, rather than an individual’s pay. In the meantime, from April 2024 he will move the threshold to £60,000 and half the rate at which the benefit is clawed back, so that only someone earning £80,000 or more will repay the whole lot.
Under that change Brown will still need to pay some back, but his immediate reaction to the budget change is positive. “In terms of real money we will be about £1,500 a year better off. The only thing that is annoying is that I will have to wait for it to come into effect. For this [tax] year, when prices are still going up, I will still be repaying it all,” he says.
The national insurance cut will further increase his take-home pay, but he says he isn’t sure it could be justified “when we have councils going bankrupt and the NHS is struggling”, adding: “I would rather pay my NI if I could see it going to improve services.”
‘I like the fact that he’s extending the Isa allowance’
Kenny Cheung has spent the last few years wisely putting any spare cash he had into various stocks and shares Isas.
The 42-year-old software developer, who lives with his wife, Vanessa, in Glasgow, says that while they keep a small amount of savings in cash to cover unexpected costs, he has invested most of their spare income in exchange traded funds – funds that mimic stock market indices around the world.
He says he uses the AJ Bell, Vanguard and IWeb platforms to manage their investments – always using each of the couple’s annual £20,000 Isa allowance to avoid having to pay tax on the returns.
Passive ETFs are popular because unlike actively managed funds that are controlled by highly paid fund managers, they come with very low annual charges.
Currently, he says, he favours the Vanguard All World ETF that has about 60% invested in American stocks, 16% in Europe, and less than 5% in UK stocks with the rest spread around the world, including in Japan, China and a number of emerging markets.
He says he is interested in the chancellor’s announcement about a UK Isa, as after years of stagnant growth UK stocks could be considered undervalued.
“It’s an interesting idea to get more people investing in UK companies; I like the fact that he’s extending the Isa allowance by an extra £5,000 (raising it to £25,000) for those looking to invest in UK firms. I guess I would want to see the actual details before I commit to putting our money into it, but I appreciate the option to do so.”
He is, he says, less enamoured about the thought of becoming an significant investor in NatWest if the government goes ahead with a big sell-off of its stake in the bank in the summer.
“I have been following the government’s announcement about the ‘Tell Sid’-style sell off of NatWest shares but to be honest I don’t think I will be buying unless they are being sold off at a huge discount to the market price. When I was younger I used to buy individual shares on a speculative basis. These days I much prefer passive funds that diversify your investment,” he says.
