Child benefit: Planned reform scrapped

The government is scrapping a planned change to child benefit rules that would have allowed more parents to claim the payment.

Currently child benefit is withdrawn when one parent earns above a certain amount, but the previous Conservative government planned for claims to be based on household income from April 2026.

Chancellor Rachel Reeves made no mention of child benefit in her Budget speech on Wednesday, but the Budget document states that the proposed change would cost too much to implement.

The present system has been criticised as unfair as some households can claim the payment even if their total income is more than that of a single parent or a family with a sole high earner.

You can get child benefit if you are responsible for bringing up a child who is under 16, or under 20 if they stay in approved education or training.

Only one person can claim the benefit for a child. The payments are £25.60 a week for the eldest or only child, and £16.95 a week for younger children.

However, payments are reduced once one parent starts earning at a certain level, known as the High Income Child Benefit Charge (HICBC).

In his last Budget in March, former Chancellor Jeremy Hunt raised the income level at which people have to start paying back part of the benefit from £50,000 to £60,000, and the level at which it is withdrawn completely from £60,000 to £80,000.

He also announced plans to move to a system where the HICBC is based on household income, not that of individuals, following a consultation.

But the Budget document published on Wednesday said: “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.”

Father-of-two David Stuart had welcomed Mr Hunt’s proposal in March, saying it would make the system “fairer”.

He said he was disappointed 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 lives in Whitburn, West Lothian with his wife and two children, now earns more than £80,000 so is not entitled to any child benefit. His wife is a self-employed child minder and earns around £10,000 a year.

“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.”

If he and his wife could claim part of the payment, it could go towards “putting money away for the kids”, he said.

Laura Suter, director of personal finance at AJ Bell, said: “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.”

By not going ahead with the change, though, “it means the system that punishes single earners will remain”.

The Budget document also revealed that the government would allow employed individuals to pay their HICBC through their tax code from 2025, instead of having to submit a self assessment tax return.

Ms Suter said this would improve the “admin side” of child benefit payments, which has been criticised for being confusing.

“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.”