Recently the Chancellor, George Osborne, revealed that as of 2013 Child benefits would be cut from families where at least one member was a higher-rate tax payer. This means that a lot of families are going to be drastically affected and more families are going to find themselves with debt problems.
What is Child Benefit?
Child Benefit is a tax-free payment that you can claim for your child, usually paid monthly. Currently, it is paid universally for those with children up to the age of 19 for those in full-time education, or 16 otherwise. Child benefit amounts to £20.30 a week for the first child and £13.40 a week for any further children.
What is a Higher Tax Rate?
As it stands, if you earn £44,000 or more per year, then you are taxed at 40% on the top slice of your earnings (Osborne announced in his emergency budget that the higher-rate income tax threshold would drop by £1,650 from 2011-12.) Therefore if anyone in your household earns £44,000 then your Child Benefits will be stopped.
Total household income isn't considered, therefore if two parents are earning £40,000 each then they will continue to receive their benefit, whereas a couple where one partner earns £50,000 and the other stays at home, they WILL lose their child benefits. However, the Government argues that this is the simplest way of targeting this benefit at the families that need it most.
The Centre for Social Justice, the think-tank set up by the work and pensions secretary, Iain Duncan Smith, expressed "concern" at the measure and urged the government to "explore alternative options" before implementation in 2013.
How Much Money Will I Lose?
At present parents can claim £20.30 a week for their first child, and £13.40 for all subsequent children. This translates into roughly a £1,000 a year for your eldest child and £700 for each sibling.
This money is extremely useful to many families and many simply cannot afford to live without it. This is why we are worried about many families getting themselves into debt trouble in the future.
As it stands, around 1.2 million households will see their Child Benefits cut, meaning that these families will be a combined £1BILLION worse off each year!
My Partner isn't the Father of my Child
The Child Benefit system will be judged on household income, if your partner is considered a member of the household (parent or not), then their income will counted. This also works the other way, if the other parent earns more than £44,000 but you are divorced or separated then their income will not be counted.
The Chancellor, George Osborne revealed much less controversial benefit news, and placed a cap on how much in benefits the unemployed can receive from the State.
Mr. Osborne stated that this cap will mean that no jobless households will be able to claim more than £26,000 per year, the average family's take-home pay.
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