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The Tory child benefit shake-up explained, and how much you could gain

The Conservatives have said they would raise the high income child benefit tax charge threshold to £120,000 if elected.

Under the chancellor’s proposals the combined salaries of a household would be taken into account rather than an individual’s, as is currently the rule.

But Jeremy Hunt’s plan has come under fire from political opponents, with Labour branding the policy that would boost households on six-figure salaries “desperate and unfunded”.

What is high income child benefit tax charge ?

The high income child benefit charge (HICBC) is a deduction that allows child benefit to be clawed back through the tax system from families where the highest earner has an income above a set threshold.

Currently, the salary threshold is set at £60,000, with those earning more than that starting to lose child benefit. It is taken away entirely if one parent earns £80,000.

The benefit is worth £25.60 a week for the eldest or only child, with £16.95 a week for other children.

But the rules have been criticised for unfairly penalising single parents and families with one high earner.

For example, a household with two parents earning £60,000 can get the full amount.

But if a household has one earner on just over £60,000, their child benefit will be reduced, and cut completely if they earn more than £80,000.

What is the Tory plan?

The Conservatives have unveiled plans to raise the high income child benefit tax charge threshold to £120,000 – and charge it to households rather than individuals if they win the general election.

It means a couple who earn up to £120,000 will be able to keep all of their child benefit if the Tories are re-elected on 4 July.

Couples or single earners would begin to lose their child benefit entitlement if they earn a total of more than £120,000 – and would only face losing it all if they hit £160,000.

File photo dated 06/03/24 of Chancellor of the Exchequer Jeremy Hunt leaving Downing Street, London. Chancellor Jeremy Hunt has been criticised by the UK Statistics Authority, the official statistics watchdog, for misleading claims in his spring Budget speech that the Government was bringing down taxes. Issue date: Friday May 24, 2024. PA Photo. See PA story POLITICS Chancellor. Photo credit should read: James Manning/PA Wire
Chancellor Jeremy Hunt has said the scheme will boost families’ financial security (Photo: James Manning/PA Wire)

They say it will end the unfairness of a single earner household paying the charge, while two working parents can earn a much higher income and continue to receive child benefit in full.

Mr Hunt said the scheme would “boost families’ financial security and give them more money to spend on the things that matter most”.

He added: “Raising the next generation is the most important job any of us can do so it’s right that, as part of our clear plan to bring taxes down, we are reducing the burden on working families.”

How much could you save – and how many people will save money?

The Tories claim the move will deliver an average of £1,500 in tax cuts to 700,000 middle-class families across the country.

The Institute for Fiscal Studies (IFS) has said those calculations are similar to their own.

IFS associate director Tom Waters said the Tory proposals would mean only 900,000 families, 12 per cent of those with children, would still be losing some or all of their child benefit.

“But at the same time, at that point one has to ask whether it’s really worth having the additional administrative apparatus, rather than simply returning child benefit to being universal, as it always was before 2013,” he said.

“This would cost around another £1½ billion a year on top of the Conservatives’ plan.”

How do the Tories say this is going to be funded?

The party claims the proposal will cost £1.3 billion in 2029/30 – with the money set to come from a crackdown on tax avoidance and evasion.

The Tories hope to raise £6 billion from their proposed clampdown – with £1 billion already committed to a proposed new national service for 18-year-olds and £2.4 billion to the proposed pensions “triple lock plus”.

But Institute for Fiscal Studies (IFS) deputy director Helen Miller said there is “a lot of uncertainty” about Conservative and Labour vows to raise revenue from stamping on tax avoiders and evaders.

There were “clear signs” of underinvestment at HMRC, she said, adding that most evasion came from ordinary workers like small businesses, plumbers and electricians rather than exotic offshore schemes.

She said: “There’s not an easy £5 billion just sitting there waiting to be picked up.

“The party would need a whole set of concrete detailed plans about how to get there. And there’s uncertainty about every pound you put into HMRC how many pounds you would get.

“History teaches us that often it takes longer to get the money into the treasury than initially expected.”

Parties should have backup plans for what they would do if that revenue turns out to be harder to get or to take longer to bring in, she added.

What have Labour said?

Labour have accused the prime minister of “adding to his list of desperate and unfunded policies that he knows can’t be delivered”.

They described the proposals as “another chaotic scattergun announcement from Rishi Sunak”.

“Rishi Sunak clearly wants to pretend the last 14 years didn’t happen, because almost all his policies reverse decisions his own party has taken,” a Labour spokesperson said.

“The choice at this election is five more years of Conservative chaos or stability with a changed Labour Party.”

The party has been urged to look at its refusal to commit to scrapping the two-child benefit cap if it enters government.

The Liberal Democrats’ Treasury spokesperson, Sarah Olney, said: “These Conservative tax policies aren’t worth the paper they are written on after years of hiking taxes on hard-working families.”

Election 2024

Rishi Sunak and Sir Keir Starmer are pausing campaigning for the 80th anniversary of D-Day. i‘s general election live blog is the go-to place for 2024 general election coverage, with everything from party manifestos to candidate news.

Starmer and Sunak faced off in the first leaders’ head-to-head debate, which focused on Labour’s tax plans and the Tories’ pledges around national service. Read i‘s political experts weigh in on who won the leader’s debate and what real voters think of the candidates.

Outside of the debate, the Tories have announced proposed changes to gender laws, but the focus has been on Nigel Farage following his shock move to stand as an MP and become leader of Reform UK. His first outing in Clacton ended with him covered in milkshake.

Labour has said it is prepared to process asylum seekers abroad and launched its plan to clear the NHS backlog. In London, its former leader Jeremy Corbyn, now standing as an independent candidate, has a fight on his hands to keep his supporters from switching to Starmer.

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