Martin Lewis is hoping for an update from the government tomorrow (Picture: Shutterstock)
Tomorrow’s budget could see a major announcement on changes to child benefit, which Martin Lewis has described as ‘unfair’.
Once conceived as a universal benefit to help all children, the Tories announced in 2010 that it would be means tested, with higher rate tax payers losing their entitlement.
Since then, the system has been criticised for penalising single parent households, or households with only one main earner.
This is because it looks at individual incomes rather than combined income – and if any parent earns over a certain amount, the household as a whole loses entitlement.
The threshold is currently £50,000 to start losing child benefit, with any family where someone earns £60,000 or more a year getting nothing. These figures have not been changed in over 10 years, so many more people are losing out when wage inflation is taken into account.
Critics point out that a family with two earners could have a household income of £100,000 and still get the full amount – but a single parent on £60,000 a year wouldn’t get anything at all.
Likewise, someone earning £15,000 with a partner earning more than £60,000 would also not be entitled to anything, as the mechanism of deciding who gets the money is blunt.
Mr Lewis has campaigned on the issue for some time, and wrote an open letter to Chancellor Jeremy Hunt ahead of tomorrow’s budget urging him to make the system fairer.
He said it was ‘by far the biggest single topic’ he had been asked to raise when canvassing opinion from readers.
Anticipating possible Budget announcements, he previously said he doubted it would be feasible to change the structure completely on March 6.
‘So if I were Chancellor I’d do a two pronged solution. A) Immediately increase the level of the cut-off to say £65,000 from £50,000 (roughly what it would’ve been had it gone up with inflation from 2013) so it impacts fewer people. B) launch a consultation on how to restructure it would be the most feasible.’
The money available from child benefit is significant, with people able to claim £25.60 per week for the eldest child, and £16.95 for each subsequent child.
It is available for any child under 16, or under 20 if they remain in education or training.
Mr Lewis said he was ‘very pleased’ that the Chancellor had already accepted there was an unfairness in the structure of the benefit.
Childcare costs remain a major expense for young families (Picture: Getty)
He shared a question he’d been sent from a reader illustrating the human impact of the policy: ‘My son’s partner tragically died 34 days after giving birth to twins. My son has taken a new job that now pays him £60,000 and is struggling with the cost of living and mortgage repayments after the loss of a second income. HMRC has asked him to repay the Child Benefit. This seems grossly unfair that a couple can bring in nearly £100,000 but a single breadwinner loses out once they earn more than half of this. Are there any plans to change this?’
The amount people are entitled to gradually drops off after £50,000, so those earning £55,000 are entitled to half the benefit and it is wiped completely after £60,000.
HMRC relies on people informing them of any changes, and can ask for any overpayment to be given back.
The system of claiming child benefit is itself confusing, with people encouraged to apply for it even if they earn more than the threshold, because being registered as being a child’s carer will count for state pension credits even if the parent is not earning a salary.
With many not realising this in the haze of new parenting, they may leave it late to apply – by which time they miss out, because it can only be backdated by three months.
Child benefit is not the only childcare support to unfairly penalise families with a single earner.
Support with free hours at nursery, currently undergoing a major extension, is also means tested by looking at single incomes rather than household income.
If either parent earns over £100,000, they are no longer entitled to help. So a family with two parents earning £99,000 could have a household income of almost £200,000 and receive the full amount of help, while a single parent on half that would get nothing.
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