Government Discontinues Child Benefit Reform Plans

The government has announced it is abandoning a proposed alteration to child benefit regulations that would have enabled a greater number of parents to claim the payment. Currently, child benefit is withdrawn when one parent’s income surpasses a specific amount. However, the previous Conservative government had intended for claims to be based on household income starting from April 2026. Chancellor Rachel Reeves did not mention child benefit in her Budget speech on Wednesday. Nonetheless, the Budget document specifies that the suggested change would be too expensive to implement. The current system has been criticized as unfair because some households are eligible for the payment even if their total income is higher than that of a single parent or a family with a sole high earner. Child benefit is available to those responsible for raising a child who is under 16, or under 20 if they are in approved education or training. Only one individual can claim the benefit for a child. The payments are £25.60 per week for the eldest or only child, and £16.95 per week for younger children. In April 2025, these amounts are set to increase to £26.05 per week and £17.25 per week, respectively. However, payments are reduced once one parent begins earning at a certain level, a mechanism referred to as the High Income Child Benefit Charge (HICBC). In his last Budget in March, former Chancellor Jeremy Hunt increased the income threshold at which individuals are required to start repaying a portion of the benefit from £50,000 to £60,000. He also raised the level at which it is completely withdrawn from £60,000 to £80,000. Following a consultation, he had also unveiled plans to transition to a system where the HICBC would be determined by household income, rather than individual income. But the Budget document published on Wednesday stated: “The government will not proceed with the reform to base the HICBC on household incomes. This is because it would have come at a significant fiscal cost of £1.4 billion by 2029-30 if setting the threshold to £120,000-£160,000, where no families would lose out.” David Stuart, a father of two, had welcomed Mr. Hunt’s proposal in March, stating it would make the system “fairer”. He expressed disappointment at the decision to abandon it, and at the fact it was “buried” in the document and not included in Reeves’s speech. David, who resides in Whitburn, West Lothian, with his wife and two children, now earns more than £80,000, meaning he is not entitled to any child benefit. His wife is a self-employed childminder and earns approximately £10,000 annually. “We don’t necessarily need the full payment,” he said. “But another couple [earning more] can claim the full thing and we can’t claim anything.” He added that if he and his wife could claim part of the payment, it could contribute to “putting money away for the kids”. Laura Suter, director of personal finance at AJ Bell, commented: “There’s no doubt that it would have been a huge administration task for HMRC to assess couples on their household income rather than sole income, meaning there is no easy fix.” She further noted that by not proceeding with the change, “it means the system that punishes single earners will remain”. The Budget document also disclosed that, from 2025, the government will allow employed individuals to pay their HICBC through their tax code, eliminating the need to submit a self-assessment tax return. Ms. Suter indicated that this would improve the “admin side” of child benefit payments, which has been criticized for being confusing. She concluded: “However, that’s merely fixing one problem with the system when in reality it needed larger scale reform. The complications in the system mean it is underclaimed and not well understood.”