Child Benefit

In September 2010 the Chancellor of the Exchequer announced that he would withdraw 100% of Child Benefit from any household in which someone was paying higher rate Income Tax (currently anyone earning over £42,475, that is, £7,475 personal allowance plus £35,000 taxable income). During his budget statement on the 21st March 2012 he announced ‘that Child Benefit will be withdrawn through an income tax charge, and that the charge will only apply to households where someone has an income over £50,000 a year. For households where someone has an income between £50,000 and £60,000 the charge will apply gradually, preventing a cliff edge effect. Only households where someone has an income in excess of £60,000 a year will no longer gain from Child Benefit.’ We are pleased to see that the Chancellor is capable of undertaking a U-turn, presumably because it had dawned on him that actually withdrawing Child Benefit from high-earning families would be an administrative nightmare, and because the ‘cliff-edge’ was proving unpopular amongst the Conservative Party’s core voters. Child Benefit will no longer be withdrawn from anyone, so it is again a universal benefit. Whether the Chancellor’s plan for a tax on children will meet with universal approval is an interesting question.