Budget child benefit Q&A: what are the changes?

“I simply could not justify asking those earning £15,000 or £30,000 to go on paying child benefit to those earning £80,000 or £100,000,” the chancellor told the House of Commons today. “All sections of society must make a contribution to dealing with the deficit – without this measure we wouldn’t get the job done.”

But under the new budget, exactly who will still get child benefit? Channel 4 News sets out to unpick what was, what is, and what will be for those receiving child benefit.

What is child benefit and who gets it?

A tax-free payment that can be claimed for a child until they are 16, or 16 to 18 in full time education. In some cases, it is paid until the age of 20 if the child is in approved training that counts for child benefit. It is worth £20.30 per week for the first child, which equates to £1,055.60 a year, and £13.40 per week for each younger sibling, or £696.80 a year per subsequent child.

What changes were being proposed before the budget?

George Osborne had said that child benefit would be withdrawn from January 2013 for anyone earning more than the current 40 per cent tax threshold of £42,275. Critics, including the Child Poverty Action Group (CPAG), and Nick Clegg, feared this would produce “unintended consequences”. These were, according to the deputy prime minister, that lone parents on £43,000 would end up losing their child benefit, but double-income households in which both parents earned £85,000 could still keep it, if neither was paying the higher rate of tax. The CPAG said their previous proposals would have pushed as many as 20,000 children in 8,000 families into poverty. They argued that many households living well within their means would be left with as little as £10 a day to survive on.

What is going to happen to child benefits now?

Today, the chancellor watered down his initial proposals. Although he said he could not justify continuing to pay parents on £100,000 benefits for their children, he conceded that plans to withdraw child benefit from any household with a 40 per cent taxpayer had been unfair.

Instead, he said the reduction would be tapered out once one parent earned £50,000, at a rate of 1 per cent for every £100 earned over that threshold.

“We want to avoid a cliff edge that means people lose all their child benefit when they earn just a pound more.” Mr Osborne said.

However those with an income of more than £60,000 will still lose all of their child benefit.

Who will the changes affect?

According to the Treasury, 15 per cent of families will now see their child benefit entitlement change. 85 per cent of families will continue to receive child benefits in full, while another five per cent will get reduced benefits.

750,000 families, who had previously been in line to see their child benefits withdrawn, will now keep some or all of their child benefit. Overall, 90 per cent of families will remain eligible for child benefits, the chancellor said.

The change means that a family with one parent earning £25,000 and one earning £45,000 will still receive the full benefit, while a family with one parent earning £25,000 and a second earning £55,000 will receive £527.80 a year for their first child and £348.40 for each younger child.

How will it be paid for in the new budget?

The change will be funded by bringing the threshold for the 40p tax band down from £42,476 to £41,450, which means that an additional 200,000 to 300,000 workers will have to pay higher-rate tax.

Has he removed the cliff edge?

The Treasury has admitted that the new arrangements will still mean that a family with two parents earning £40,000 each, earning a total of £80,000 for a household, will still keep all of their child benefit, while households in which one parent stays at home and another earns £50,000 will lose out.

“Rather than facing a cliff edge, family budgets of those affected now face being thrown down a flight of stairs,” according to CPAG.

They say that children should not be made to pay for the deficit, and that child benefits should remain universal.

Families, they argue, have already suffered from a freeze in rates over three years, from 2011/12 to 2013/14.