It is estimated that around 400,000 parents in the United Kingdom are going to be faced with a higher marginal tax level then millionaires. George Osborne originally planned to significantly cut Child Benefit, however in his recent budget announcement, the cuts were not as significant as expected. For parents who earn over £50,000 a year they are going to have extra tax liability because they are going to be unable to claw back as much Child Benefit.
Mr Osborne initially intended to deny all Child Benefit to a couple if one of the partners was in the higher tax bracket. This is no longer the case, but many parents are still going to see the cuts as unfair on the middle classes. An accountant from Grant Thornton has recently commented, “If the parents are earning just under £50,000 each then they will remain entitled to child benefit, but if one parent earns £60,000, and the other earns nothing, they will lose all Child Benefit.”
These figures mean that more traditional families, where one parent stays home, will be the hardest hit as the Child Benefit is only calculated on whether one parent has an income above the set threshold.
However, it is good news for parents who are earning between £40,000 and £50,000, as they will be able to still gain from Child Benefit, which was not originally expected. Previously it was thought that the Chancellor would make an announcement meaning that even parents in this income bracket would lose their entitlement to Child Benefit.