Child benefit is to be axed for higher rate taxpayers from 2013, Chancellor George Osborne has told the Conservative Party conference yesterday.
The key points of the announcement are:
- Child benefit will be withdrawn from families where one or both parents are high-rate tax payers. This will affect people earning more than £44,000
- The cuts could affect over 3.2 million people
- However, if both parents earn less than £44,000 they will still be able to claim child benefit
Now as I tweeted yesterday the government’s decision to remove child benefit for high earners should not come as a shock to anyone. ‘Austerity’ is the word of the moment and the proposed cuts will apparently save HM Revenue & Customs (HMRC) £1bn annually.
However, based on the details announced by George Osborne it would appear a family where both parents earn £44,000 per annum, i.e. £88,000 in total, will still receive child benefit. But a family with just one working parent earning £45,000 would see their child benefit axed.
So in effect a family who has taken the choice of one parent forgoing their career to bring up their children rather than pack them off to a child minder will effectively be penalised. Absolutely ludicrous if you ask me!
The BBC quote Mr Osborne as saying "It's a big decision for us, but we think it's absolutely necessary and fair, given the financial situation we face."
He defended the aforementioned anomaly by saying his plan was "the most straightforward" option - which would avoid across-the-board means testing. The alternative was to introduce a "complex" system of means testing where all households had their incomes assessed.’
The BBC has compiled a handy Q&A on the proposed cuts. Click here.