A Mess Has Been Made Of Child Benefit, And The Clear-up Operation May Not Be Easy

30th March 2024

Child Benefit was for a long time universal, in recognition of the extra costs that children bring whatever the family's income.

In 2013, under the pressures of austerity, the coalition government was finally persuaded by the same logic that had proven irresistible to previous governments for so many other benefits. It chose to focus scarce resources on those with lower incomes.

Well, sort of. The "High Income Child Benefit Charge" is a highly irregular way of making a benefit income-related. Formally it is an increase in tax, paid by the highest-income parent in the household. It kicks in when their income rises above £50,000. It is phased in at a rate such that, once income reaches £60,000, the charge is equal to the amount of Child Benefit the family gets, at which point it caps out. In other words, it's a roundabout way of clawing back Child Benefit.

A few things about this are either unusual or weird or both (some things that governments do are weird but not unusual).

First, that parent gets a very arbitrary-looking spike in their income tax rate, and one whose size depends on how many children they have. For example, someone with three children can currently face an income tax rate of 69.1% on income between £50,000 and £60,000. Above that the rate reverts to the headline higher rate of 40%.

Read about the whole mess over at the Institute for Fiscal Studies