Chancellor Jeremy Hunt announces modifications to the Child Benefit system, increasing the income threshold for eligibility and introducing a new approach to support UK families financially.
Chancellor Jeremy Hunt unveiled the 2024 spring budget in the House of Commons, introducing significant changes aimed at addressing the fairness of the UK’s Child Benefit system. Under the new structure, families will only start to repay Child Benefit once they earn £60,000 annually, up from the previous £50,000 threshold. The adjustment also allows individuals to earn up to £80,000 before completely losing their entitlement to Child Benefit, a raise from the former £60,000 cap. This revision is estimated to benefit approximately 170,000 households across the UK, providing financial relief and tackling disparities within the existing framework.
Set to commence on April 6, 2024, these changes will precede further discussions regarding the transition of the high-income Child Benefit charge to a household-based approach by April 2026. In addition to Child Benefit adjustments, the budget disclosed other modifications, including council tax rises in England and an extension of the Household Support Fund.
Martin Lewis, the founder of MoneySavingExpert, offered insights into the budget alterations during an interview with LBC. He highlighted that the new thresholds permit families with a single earner exceeding £60,000 to retain some Child Benefit, with full cessation at an £80,000 income, ultimately affecting around 170,000 families.
Furthermore, the budget announced a 2p reduction in national insurance, marking the lowest personal tax level since 1975. This cut is set to benefit 28 million workers and 650,000 self-employed individuals by providing additional annual income, despite potential counter-effects from the freezing of income tax thresholds resulting in “fiscal drag.”
In an unexpected move, Hunt committed to paying more capital gains tax on his property sales than required by the tax cut he introduced, signaling ethical financial practices amidst political scrutiny.
Meanwhile, the Labour Party, led by Rachel Reeves, responded to the budget by adjusting its funding strategy for key policies like NHS improvements and free school breakfasts. Initially planning to abolish the non-dom tax regime to gather funds, Labour shifted towards identifying savings within government spending after the Chancellor’s parallel action for funding a National Insurance cut. This approach aligns with Labour’s focus on maintaining economic credibility without increasing taxes or public debt.
The budget and subsequent political strategies reflect a nuanced approach to addressing income disparities, supporting families, and ensuring fiscal responsibility within the UK’s current economic landscape.
