Jeremy Hunt eventually bowed to pressure, admitting the tax penalty on many high-earning parents was unfair, resulting in some paying marginal tax rates of 64 per cent.
Announces restructuring of controversial company High Income Child BenefitThe chancellor said nearly half a million households will see their average income rise by £1,260 in the year starting in April. For some the benefits will be even greater, up to £2,212 a year for some parents with two children.
Under tax rules introduced in 2013, child benefit received by high earners (those earning more than £50,000 a year) will be clawed back through the tax system on a sliding scale.
called “child taxSome believe the charge has resulted in hundreds of thousands of parents having to pay back some or all of their benefits. Currently, Child Benefit is £24 a week for the oldest or only child, then £15.90 a week for each additional child. This means the amount for a family with two children is £2,074.80 per year. On April 6, the rates rise to £25.60 and £16.95.
Following lobbying from campaigners, the chancellor announced a series of changes – starting with raising the threshold to £60,000 for the tax to start next month. The government says this will free 170,000 families from government control.
Child benefit is not means-tested and the charges are a way for the government to reduce the amount paid to higher earners. About 373,000 people 2019-20 was a hit, with £416m raised for government coffers that year alone. As of August 2022However, more than 680,000 families choose not to receive child benefits to avoid penalties.
Frozen tax thresholds and wages rising in line with inflation have dragged more parents into the web of accusations, fueling calls for change.
Currently, the fee is 1% of the child benefit amount for every £100 of income for the highest earners, ranging from £50,000 to £60,000. For those earning over £60,000, the charge is 100%. In fact, they receive no child benefits.
As well as increasing the charge threshold, child benefit will not be completely withdrawn until an individual’s annual income reaches £80,000 or more.
Hunt said the government planned to move to a system based on household rather than individual income by April 2026 to more comprehensively address “inequity”, adding that it would involve major changes to the tax system.
Overall, the government estimates that 485,000 families will receive an average of £1,260 in child benefit in the 2024-25 tax year as a result of the changes.
The chancellor also provided some relief for nurseries and pre-schools, which were tasked with a major expansion of child care services in last spring’s budget to provide 30 hours of child care for eligible children under five by September 2025. Free” child care.
The early years sector is disappointed there has been no increase in the amount of government care provided for three- and four-year-olds, which many believe will not cover costs and lead to nursery closures.
Hunt announced that hourly early funding rates will increase based on delivery costs over the next two years, equivalent to an additional investment of approximately £500 million.
Neil Leitch, chief executive of the Early Years Alliance, which represents 14,000 early years providers, said the move had long been requested and welcomed. But he added: “While today is undoubtedly a positive starting point, more support – including significant long-term funding and comprehensive Workforce Strategy – Crucial Offers.”
The Chancellor also announced an “initial” £105 million in funding for 15 new special free schools, creating more than 2,000 extra places for children with special educational needs and disabilities across England. The school location will be announced in May.
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